We’re Closed at Our Little House

 

We finally closed on our home refi yesterday.

You might recall I wrote back in February that we began trying to refinance our house. Moving to a smaller house does release many people from a mortgage all together, but the recession set us back, as it has many people.

Little did we know, that even with near-perfect credit and stable job histories, how discriminatory banks are against little homes.

We sought a refinance, not only because of the lower interest rates, but to get us off the Adjustable Rate Mortgages (ARMS) we were on for Our Little House and The Belle Writer’s Studio.

ARMS can be costly and dangerous. If you cannot get them paid off, you continually have to renew them, costing more closing costs each time. Also, if interest rates rise, you may suddenly find yourself priced out of your home.

We also didn’t feel like we were making headway in our goal to be debt free within 7 years.

Our bank flat out told us they would not give us a refinance with a fixed rate mortgage. They would renew our ARM, but told us the “comps” weren’t there. “Comps” or “comparables” are the homes that have sold near you within any given time. The comps have to be similar in size and design and have to have been on the market within the past 3-6 months of when you’re seeking your loan.

At the advice of our banker, we went to talk to a mortgage broker. He shook his head and at first, said he would have the same problem finding comps. As he turned to the computer to prove his point that we wouldn’t find the comps the banks would require, he was surprised to find some that he thought would work. He made a list of 6-8 homes, not exactly 480 square feet, but 600-900 feet lake homes that had recently sold.

He took my name and number and told me he would do some further investigating. The next day, he called me back and asked us to fill out a credit application. When that came back to his satisfaction, in the “excellent” range of a 800 credit score, we began the process even he didn’t realize would take so long.

By mid-May, after jumping through hoops that included the appraisal, providing 3 years of tax records and self employment statements from our tax accountant, various letters of explanation as to holes in work history and a couple of delinquencies when Dale was laid off, a closing date was set for May 30.

This is a mega-bank that took bailouts from the American taxpayers, then shipped jobs overseas and claimed huge profits in ensuing years.

How do they help stimulate the economy? Not by giving a couple with near perfect credit, but a small home, a mortgage. Two days before closing, much to our annoyance, backed out of approving the loan.

Back to square one, our mortgage broker didn’t give up. He went to one more lender, a small bank in Arkansas.

Yes, they too, made us jump through a few more hoops such as providing a P&L statement for my writing business (I’m a home based writer, people, not a corporation).

The biggest hoop was their refusal to accept our woodburning stove as an “acceptable” heat source in Our Little House. We had to install four electric baseboard heaters to satisfy their requirements, although the appraiser wrote on our appraisal that wood burning heat is a “mainstream” heat source in this area of rural America.

I’m told this cracking down on the “comp” part of the appraisal is a new thing instituted by banks and is not only affecting those of us with small homes. I’ve seen statistics indicating that 30-40 percent of mortgage refinances are being denied due to the appraisal process, mostly because of shrinking home values, short sales and/or foreclosures used in the comps.

The lesson here, especially for people seeking to purchase a home smaller than the “norm” or those wanting to build a small home, do it as we should have done, debt free.

Have you had problems securing a mortgage since the real estate collapse? Or other problems with lenders?

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26 Responses

  1. Merr says:

    Congrats, you guys! I bet it’s a HUGE relief, little house or not!!

  2. Congrats! The finance world is certainly on a roller coaster lately.

  3. Sheryl says:

    What an ordeal! Glad you can
    Ook forward to calmer, easier times. At least, I hope the refi accomplishes this for you

  4. Alisa Bowman says:

    I’m glad you finally got this worked out!

  5. Jane Boursaw says:

    Glad to hear your re-fi went through! We’ve had such awful, awful experiences with banks and mortgage lenders in the past few years – nearly faced foreclosure because of Bank of America’s complete and utter disregard for the law. I ended up calling every politician in three states and Washington, D.C. to get some answers and, yes, we’re finally in a better place with our mortgage. But not without a lot of panic and heartache. I basically hate mortgage companies and I’ll throw banks in there, too. I’m in a cash-only mode and rarely even use a bank account anymore. They’re just too much of a hassle.

    • Kerri says:

      I’m also glad to hear you’re in a better place, Jane. We’ll work together to eliminate debt from our lives and be rid of them all! 😉

  6. Timaree says:

    Congrats on jumping all the hoops again and again and finally succeeding. It took my son two extra months to close on his house which is not small but not large. Just little problems kept cropping up.

    We are in a mobile home on 40 acres so they say there are no comps for our home. We might have trouble if we try to sell. Bank didn’t mind giving us a loan to start with but at 1% higher rate because of the mobile home – land doesn’t seem to matter. They will mind giving new owners a loan now though it seems. Maybe I’ll just build the tiny house I want later, park it on 5 of my acres and rent the rest out. There has to be a way around somehow.

    • Kerri says:

      I know, it is aggravating, especially when you know there is land with value attached to the house too! I know you’ll find a way, just as we did, Timaree. Good luck!

  7. Carol says:

    I had good luck refinancing my 800 sq. ft. house with our local credit union. I got a 15 year fixed at a better rate than the bank. Also, it helped me to keep to my “go local” promise.

    • Kerri says:

      Excellent, Carol. I love credit unions! I wish that had been an option for us, but strangely, there are absolutely no credit unions around here. I’m very glad we were able to go through a local broker and ended up with a small bank here in our state, rather than the big mega bank anyway!

  8. mat says:

    Glad to hear that everything worked out, Kerri. Sounds like that broker really earned his paycheck and you might want to contact Angie’s List to rate him as an extra thank-you. And of course, everyone loves pie.
    We’ve been trying to time a re-fi for about a year now. We’re so close to 80% equity at any given time (it was closer to 90% earlier in the year) so qualifying for a refinance the way we want to do it (20-year, fixed low-rate HELOC to pay off 2 mortgages) is tricky.
    Maybe soon.

    • Kerri says:

      You’re right, Mat, he did earn his paycheck. I don’t know if we have Angie’s List around here (I looked once and there wasn’t anything for our town), but I do plan on sending him a basket from Harry & David. 🙂 I hope everything works out with yours as well. Please do let us know if you enter the process and if there are any other things people need to be aware of with financing a small home.

  9. Joan says:

    This unfortunately, is the norm.

    I can remember back when I first started this, 3 years ago. I had the property, had the house, (or at least a proposal stating it was going to be a house), and decent enough credit to get what I wanted. But not enough to finish it. The banks didn’t consider it a house. The “sub prime” mortgage companies wouldn’t touch it.

    So, I decided to do it myself, little by little. Even had a camper to live in while I did. But after the “township” decided I couldn’t live in my camper while building,(temporary residence is a no-no) and then running into job problems, here I am. I pay for an apartment while less than 25 miles away is a perfectly good place to live, but I can’t afford to finish it.
    After considerable thought, I’ve decided to go forward, but now I’m calling it my “Craigslist House”. That’s where I’m getting materials and labor to help me finish. I’m selling almost everything I own, so at least clutter won’t be a problem, lol.

    • Kerri says:

      Good for you, Joan, both on the elimination of clutter and finishing your little house. They say hindsight is 20/20 and I wish we would have leaned toward no debt and finishing the house little by little.

  10. Alexandra says:

    This is an incredible tale. I’m glad you no longer have to worry and hope you will write an essay for a publication with wide distribution. It’s important for people to realize this type of thing is going on. Reminds me somehow of our fight with NStar, the utility company, that refuses to take into consideration the concerns of Cape Cod citizens that herbicidal spraying will pollute our drinking water, relying on old science that is already on the books as a basis for their decisions.

    • Kerri says:

      It seems like no matter where we turn, Alexandra, we’re all in a fight against the mega corporations these days. 🙁

      • I agree with Alexandra and am so impressed Kerri that you are fighting the good fight, and managed to win. We little people have to stick up for ourselves! I read Alexandra’s blog (Chez Sven) and so far the people of the Cape have kept the spray out. I just hope they win the fight definitively. Sorry that you faced such an uphill battle despite being such a good financial bet. Glad you finally closed! (And poo-y on the mega-corp that did not finance you. Their loss, not yours!!)

        • Kerri says:

          Yep, they could have made some money on us and we could be 2 months into our debt free plan now, instead of just beginning. But, things work as they should and we’re just happy now that it is over for us.

      • rob says:

        I hate (really hate) to defend the banks in this, but a lot of the trauma we’re seeing now with getting loans is due to constraints put on them by our elected idiots.

        That plus the fact that they really must be hurting as more and more people walk away from large mortgages and houses that are way under water and leave them holding the house that they can’t sell for 1/4 the value of the original loan.

        Debt-free is the way to go.

        • Kerri says:

          While I agree, Rob, that our elected idiots have put some constraints on banks, there is absolutely no reason to deny a person a loan because they cannot find the “comps,” especially when the people applying are an excellent credit risk. Otherwise, this one bank our broker found wouldn’t have been able to do it either. But I do agree, debt free is the way to go.

        • Sheryl M says:

          @Rob – the banks really are hurting, but is because of their own doings. They are the ones who made bad loans to unqualified people, all for money. Their new rules are due to the mess they got themselves into, and it really does hurt the folks who have/had good credit.
          A year ago, our equity loan on the cabin came due, and I went through with the renewal process. What an experience! Between proof of insurance, appraiser visits, non responsive bank loan reps, it took us over two months to complete. I got the impression that our bank 1 – didn’t care if they renewed the loan, and 2 – created all these new rules because of their previous financial misconduct.

          Of course — a previous loan renewal process had them sending out a property appraiser who asked: “What do you want the property to be worth?” No kidding.