A House By The Park

I’ve only had two mortgages in my life and they were both for small amounts of money and during pleasant financial times. Since the sub-prime market collapsed several months ago though, getting a loan has become much, much more difficult. My credit is great and I have a strong cash position, but even so, getting a jumbo loan is seemingly 10x more difficult than it has historically been.

Shopping for mortgages is not a pleasant process either. Most companies want you to give them all sorts of personal information before they even hint at what rates they can get you. Even places like Lending Tree that purport to streamline the process are little more than information-selling lead-generators that put your personal information in hands you may not be comfortable with.

One service that seems to stand above the rest, however, is the recently introduced Zillow Mortgage Marketplace. The great thing about Zillow is that you simply enter as much or as little info and you want, and mortgage brokers simply send you offers through the Zillow website. They don’t know your name, your contact info, or anything else you may not want them to know. They only know what you decide to tell them. In my case, income, net worth, desired loan style, and a few other things. Within an hour of filling in some info, I got ten mortgage offers via my Zillow inbox, at least a few of which would have been great to go forward with.

In the end, since I have such a small closing window (July 31st), I felt more comfortable going with a local institution who underwrote their own loans. I went with Wells Fargo and loan officer Steve Altchech, upon the personal recommendation of my real estate agent (UPDATE: 5/30/09: I no longer recommend Mr. Altchech). He got me the following terms, which are crazy-good in this tough market. Even my previous mortgage guy who wanted my business again said “Take it!”:

• 1st Mortgage: 5/1 ARM at 5.85%
• 2nd Mortgage: HELOC at 4.75%, indexed to prime minus .25%
• No points and no fees other than title, escrow, etc.

Once the mortgage market settles down again, I can think about refinancing to a fixed mortgage, but for now, I’ll take the cheap money.

All set to close on the 31st!

During the few months my house has been waiting for permits (which I should finally get this coming week! woohoo!), I’ve been exploring different refinancing options to take advantage of how low 30-year fixed mortgage rates are right now. The process has been anything but straightforward and it’s starting to get a bit infuriating.

I am currently holding a 5/1 ARM at 5.75% and a home equity line of credit indexed to prime-minus-0.25% with a floor of 4.22%. Since prime is currently 3.25%, the line is currently floored. The ARM is for the maximum amount allowed short of a jumbo.

The process began for me back in mid-February when I happened to notice Countrywide advertising 30-year fixed jumbos at 6%. I hadn’t seen jumbos below 7% since the sub-prime crisis began, so I got the ball rolling. Everything seemed great for the first few weeks and my appraisal came in at exactly what I paid for the house, so I thought I was home free. Then the trouble began. Countrywide underwriting began asking for all sorts of additional documents, which I ended up providing eventually because they said that was all they needed to close. Then, a whole two months into the process, they wanted me to go to my HR department and provide written compensation guarantees using language my HR department was not comfortable with (and neither was I, to be frank).

All this for someone who has perfect credit, a comfortable salary, plenty of equity in his property, and the ability to pay off the entire house tomorrow if necessary. At this point, I felt something strange was afoot at Countrywide underwriting, so I called up my current lender, Wells Fargo, to see what their best deal was.

My previous agent at Wells told me they didn’t have any great jumbos available, but that they could refinance my first mortgage into a 30-year fixed at 4.875% and keep my HELOC as is. Not bad at all. I spent the evening creating a spreadsheet comparing cash flows between the split option and the jumbo option and sent it to my Wells agent in advance of our meeting the next day.

To my surprise, my agent tried to forward my email and spreadsheet to a friend in his office with a snarky note attached to it. To his surprise, he accidentally hit “reply” instead of “forward” and it came to me. I called him immediately to cancel our meeting and our financial relationship.

Always remember the golden rule of e-mail: If you aren’t comfortable with the entire world seeing an e-mail you’re writing, then don’t write it. Or at least don’t be a jackass and send it directly to the person you’d least like to see it.

Anyway, I had nothing against Wells Fargo as an institution, so I called another agent in Seattle and got the ball rolling on the split option refi. Everything was hunky dory until the appraisal came through underneath what I paid for the house. I would understand this if I bought at the peak or if I didn’t get the place off-market for under even the tax assessed value, but something didn’t smell right. I looked at the appraisal and the person got some material things wrong, including square footage and using comps that weren’t even in my neighborhood!

So now it appears I have to dispute the appraisal.

Here’s what makes no sense at all to me though: Since the jumbo limit in my area has gone down about $60k, I am willingly paying $60k to decrease the size of this loan down to the new limit. Therefore, I am owing my bank less money. Therefore, even if the property was appraised at one dollar, the bank would be better off carrying my new loan than my old one, from a risk standpoint! There shouldn’t even be a loan approval process at all in this case!

What makes me even more mad is that I met one of my neighbors yesterday who was in the same situation with ING, and he said he spent literally 5 minutes on the phone with ING and did a “mortgage modification” into a 30-year fixed with no paperwork, no escrow, no appraisal, etc. Why I can’t do something like this with Wells, I have no idea.

Permits are coming this week, so having this issue outstanding for three months now is starting to really make me nervous.

I finally closed my refinancing a few days ago and am happy to have that long chapter behind me. The process started way back in February and because of some ridiculousness by Countrywide and then several more hoops to jump through at Wells Fargo, it didn’t end until now.

At least I ended up with a 4.875% rate, which I couldn’t be happier about, especially considering rates have risen substantially since I locked.

I remain aghast, however, with how much waste and financial nickel-and-diming there is in the mortgage industry. All I did was change the rate of my existing mortgage with the same bank and pay the principal down a bit. That should have been achievable with a simple phone call, but instead took months of back-and-forth, credit checks, paperwork, and all the other trimmings of a full mortgage application. Not only does Wells Fargo get to keep my business but they also make money on all the fees, including escrow which shouldn’t even be necessary since it’s the same bank my existing mortgage was with. Now I know why Wells Fargo owns their own escrow company. I think it sucks that banks can do “mortgage modifications” for people in a few minutes over the phone but refinancings take forever and require full paperwork.

Anyway, the final hurdle is now cleared. Deconstruction is scheduled for early July.

Although I can’t put the entire house on a credit card, I can pay for a lot of its elements with one… like deconstruction, printing fees, legal fees, and plenty of other items. Because of this, it made sense to use the most lucrative credit card possible. My friend Calvin alerted me a couple of weeks ago to a new card by Schwab that gives you 2% cashback on every single purchase. Not bad at all, and much better than the tons of 1% cards and airline mile cards out there.

Furthermore, Schwab just deposits the 2% into your brokerage or bank account automatically at the end of each month. No more messing with rewards, redemptions, and other roadblocks designed to get between you and your refunds.

2% may not seem like a lot, but it adds up. I’d rather spend that 2% on upgrades than just have it disappear into the ether.