My Housing Buying Process

Documenting my experience:

For some time I have been casually looking at houses just to keep my eye on the market and see what is out there and available.

Sometime in August of 2021, I saw a condo in the Santa Ana area in the $300K range. I took a mental note of it but wasn’t thinking of doing anything about it really.

Then in February of 2022, I started seeing market pressures changing and the FEDs would have to raise rates from their near lows to stop inflation. I started looking more aggressively. Some of the reasons are that sellers seem to be a little bit more motivated to sell, access to cash was available, and there is less competition for buying.

I was looking in the Orange County area of California, Los Angeles, San Diego Ca, San Antonio Tx, Austin Tx, and Omaha Ne. Different reasons for each place. Orange County due to proximity, Los Angeles due to familiarity, San Diego due to city investments in the city, love Austin, real estate investment friend lives in San Antonio, and some family in Omaha.

Did a quick trip out to San Diego, Austin, and San Antonio to do a vibe check.

Then saw a property in Santa Ana again in the $300K price range back in May. Went to tour the property since it was on the market in California and at a great price. I found out that the lower price point was because it was on lease land from the Segerstrom Family Estate. The lease ends in 2037 in 15 years. They own a large portion of land in Orange County the South Coast Plaza Mall is on leased land owned by the Segerstrom Family Estate. My friend and also a real estate agent told me to inquire if my bank would do a loan for a condo on lease land.

June 2, 2022: Made a few calls to the bank to see if they would do a lease land condo loan. They said they would so I started an application with them.

June 15, 2022: The pre-approval amount came back at $325K I did not put in an offer for the place because I was still out of my available price range and the condo was listed for $335K

June 22, 2022: That condo in Santa Ana sold for $360K. I started looking elsewhere…

June 22, 2022: I call a real estate agent in Omaha Ne to inquire about a house for sale at $190K. We do a virtual walk-through later that day. I ask if they can represent me as the buyer also with a bit of a kick back and they say yes but they will get another agent to represent me within their agency. Additional note: I’ve noticed in Omaha, Ne houses in the $100K range look weathered and extremely lived in and need work, but there is a set of homes that a construction company has either teamed up with the owners and performed some cosmetically repaired most of the items to make it very livable and they are in the $200K range. Lots of times you can see this on Redfin that the property was bought a few months prior for the $100K range and put back on the market in the $200K range but Google Street View Photos are completely different than the photos on Redfin.

June 24, 2022: That house for $190K goes under contract with someone else

At some point, my bank connects me with a real estate agent in Orange County, San Diego, and Omaha Ne. The OC and SD agent don’t have any homes or condos under $325K

July 5, 2022: I ask the Omaha real estate agent to put an offer of $198K on the house listed for $205 and down from $210K. Had to send a Pre-approval letter to the Agent. The Seller Countered the offer but I didn’t find out until the next day.

July 6, 2022: I submitted my notice to vacate my apartment on a slightly unrelated item my last day in this apartment will be August 26th, 2022. I was getting a haircut and the agent called with an urgent counter the seller wanted to counter at $202K with a rush close date on July 27th. I initially agreed. Then a few minutes later I called the Agent back and asked him to nudge it to $201K. If not let’s move it to $203K, a slight issue with the number (4). The agent called me back and said they wanted $203K (of course but don’t tell them that’s on the table “that’s my fault I should not have told him about the $203K option”). Agent send me several documents to sign including but not limited to

1. Affiliated Business Disclosure, to work with Title company (1 page)
2. LBP (2 pages)
3. Lead-Based Paint Pamphlet (2020), (20pg)
4. Seller Property Condition Disclosure (4pg)
5. Offer to Purchase document (10 pg)
6. Notice Regarding Wire Fraud (1 pg)
7. Agency Disclosure (2pg)
8. Good Faith Offer (1pg)
9. Inspection Authorization (2pg)
10. Uniform Purchase Agreement (10pg)

July 7, 2022: Flew to Omaha, Nebraska to see the property (and some other errands). The Agents assistant emailed me to give me a list of items;

• Earnest Deposit: to be delivered or deposited by July 8th, 2022
• Title Company Name and Phone Number
• Appraisal due by July 20th, 2022
• Termite Inspection: TBD
• Home Inspection: Scheduled for July 8th, 2022
• Loan Approval is due a week prior to closing
• The final Walkthrough will be done by the Agent a few days before the close
• The closing date is set for July 27th, 2022

A few reasons I agreed to this is that the closing date coincided with the July meeting for the FEDs where I am sure they will raise the interest rate at least another 50 basis points. Now with CPI core inflation at a 40-year high at 9.1%, they are expected to raise a full 100 basis points, found this out on July 13th. Another reason is that I am moving and worst-case scenario I can move there even if I didn’t plan for that action. Overall I am not concerned with the seller’s expected closing date, it’s arbitrary because they want to go on vacation afterward.

Included in this day: I talked to the loan officer for the first time over the phone we have been communicating via email prior to this. She asked if the place I want to buy is in Omaha, Nebraska, and asked if I was planning to move there and I replied no this will be an investment property (which was a mistake on my part “I should have asked for the options”). I have previously emailed what if I went out of state for a property and she said she would need a letter from my W-2 HR company letting the creditor knows that they are fine with the move and my salary will not change. With an investment property, the interest is much higher somewhere around 8% at the time, I was quoted 5% for a conventional loan. She ended up suggesting that I do the loan as a second home, the interest rate will stay at 5% but I will have to pay 3.125% points as a loan originating fee equivalent to a $6166 fee. She went to rework the loan and send my new paperwork.

July 8th, 2022: Transferred earnest funds to escrow account. Around 11:30 am I met the Real Estate Agent in person for the first time at the house and did a quick tour while the home inspection guy was wrapping up his paperwork for me. Went through items the home inspection found about 30 items ranging from Acceptable to Safety hazards. There were 10 items in bold that needed to be fixed including but not limited to; (1) the sidewalk has a protruding value and people could trip, (2)active moisture on the ceiling near the connection to the garage, (3)active moisture on the ceiling near the front door, (4)railing for basement needs to be installed, (5)co detector not detected, (6)outlet on both sides of sink losing power when GFI tripped, (7)outlet on the basement has no ground but is testing ground, (8)two different breakers in a Bryant electrical panel should be the same, (9)Gas shut off value is missing a water heater, and (10)no recent service tag on furnace recommends water tested be performed on the heat exchanger and servicing.

Paid $370 for Inspection with a $25 discount for veterans.

The agent worked on (11)Home Inspection Notice (contingency removal) and sent the request to me to sign.

July 11th, 2022: The seller has 72 hours to respond to the Home Inspection Notice (contingency removal) form meanwhile I am dealing with the loan officer. I email her and call her to ask some questions. I also talk to the Agent to find out what is the next steps and to find out if he can be the property manager, I will interview others but he is only charging 10% of the rent and nothing upfront. The Loan Officer tells me that if I try to do the Owner Occupied route the co-borrower would have to go through the same requirements as me and if their FICO is lower that is the one that will be used. The other option of living there would mean a lengthy process through my HR department of explaining I need to be full-time remote and living out of state. Also, the loan approval is conditional on multiple factors. She also sent several documents to sign;

1. Notice_of_Intent_to_Proceed
2. Addendum_to_Loan_Application_Homestead_Collateral (1pg)
3. AFBA_Disclosure_Statement_-NFC0673 (2pg)
4. Authorization_to_Release_SSN_Verification_-_Apply_for_Mortgage (1pg)
5. Borrower_Certification_and_Authorization (1pg)
6. Consent_to_the_Use_of_Tax_Return_Information (1pg)
7. Consumer_Handbook_on_Adjustable_Rate_Mortgages (13pg)
8. Float_FL_Discl_-NFC0601 (1pg)
9. Housing_Counseling_Agencies_Notice (4pg)
10. Loan_Estimate (3pg)
11. Mtg_Price_Comm_-NFC0599 (2pg)
12. Mtg_Price_Comm_Adden_-NFC0607 (1pg)
13. NRTRC_Of_Appraisal_or_Valuation_-NFC0738 (1pg)
14. Request_for_Transcript_of_Tax_Return_IRS_4506C_IVES_-_1040 (2pg)
15. Settlement_Services_Providers (1pg)
16. Uniform_Residential_Loan_Application (9pg)
17. Uniform_Residential_Loan_Application_-_Lender_Loan_Information (2pg)
18. Your_Home_Loan_Toolkit (16pg)

July 12th, 2022: The title company emails me to let me know two documents have been updated;

1. Document “Earnest Money Deposit 2022-07-10 11_57” has been added or updated.
2. Document “Commitment 2022-07-12 13_20” has been added or updated.

July 13th, 2022: Loan Processor emails and calls miss the call and replied that I would call back left message. Loan Processor looking for several documents: (requested by email)

1. Evidence of Homeowner’s Insurance 
2. June Brokerage (IRA and Roth IRA) Statements
3. Proof of liquidation of retirement funds and proof of deposits
4. Most recent Trading Brokerage statements
5. Send all Invoices for any Inspections paid 

(Third Party Items)

1. Appraisal – Please let us know when you are ready to order the appraisal
2. Title Documentation + Property Taxes – Information was requested on 07/12/2022

Items still needed: (list is from their online portal and some items are the same as requested by email)

1. Mortgage Loan Estimate Package
2. Proof of Liquidation
3. Income/Assets
4. Forbearance
5. Rental or Lease Agreement

July 14th, 2022: I need to talk to my CPA, the loan processor, and the loan officer today. I have a few more documents to file. But I want to find out what is the tax implication of closing out my Roth this early and I want to find out why my fee is so high and do we have room to negotiate. Also, is my rate locked in yet. Additionally, if I close out my IRA right now I am down 15% or about $3000 in total funds due to the overall market being down. So in addition to the additional points fee of $6166 I am losing $3000 in my portfolio due to the down market at the time.

1. Talked to Brokerage Firm
2. Talked to CPA
3. Talked Loan Processor
4. Talked to 3 separate property management companies
5. Talked to a lawyer turned real estate investor in San Antonio

• Brokerage Firm: I realized that this is a down market and if I utilized my Traditional or Roth IRA to fund my down payment I will be making any unrealized gains or losses real. And I am about 15% down overall in my portfolio. The questions I posed to the Brokerage firm are what is better to pull out of Traditional or Roth; They said Roth is better and if you have had the account for longer than 5 years there should be no early withdrawal penalties for pulling out funds. Also, you can pull out your contributions with fewer penalties and tax liabilities with a Roth, but there are still tax liabilities with a capital gain. The other item is that you have 60 days to return the funds if I don’t use them for any reason. Traditional IRA only allows a $10,000 withdrawal penalty-free for home purchases still taxed. Some other issues brought up where is the purchase of a condo? Because the rep has heard of instances where the IRS doesn’t approve the purchase because it’s a condo and at the end of the year I will get a 1099-R form that needs to match up with the down payment.
• CPA: I asked the CPA about tax liabilities in this scenario and on the good news he said that I can add the origination fee to my base cost of the house and write it off along with the first year depreciation within my Schedule-E form just send them the closing docs when finished so that can add it to my file. I will get the 1099-R at the end of the year. I will also be able to write off the property management fee. The CPA also mentioned a cost segregation study and might want to get one to write off more items.
• Loan Processor: Then I talked to the Loan Processor, apparently my rate wasn’t locked in at the time. I was under the impression it would be locked in once I was under contract and this is not the case I have to verbally or write in I would like to have the rate lock once we are in contract. So he started that process, and for a moment he said “oh I might be able to get you a lower rate than what you were quoted”. I full minute of silence passed then he said oh no it’s still at 5% but I am locked in now and it’s a “Float Down Rate” so if the rate happens to go down at any point before close I can just ask to be readjusted to the lower rate but if the rate goes up I am lock in for 90 days are when the deal closes. The rate going down is practically an impossibility or near zero chance as the FEDs are hiking rates to stomp out high inflation and will most likely raise rates again on July 26th or 27th during their next meeting. He had a bunch of questions for me mostly is it okay for him to proceed, do employment verification, omit items not needed, am I in forbearance on any other properties, and he ask for me to submit some documents from the email request. At the end of the call, he emailed me the link to watch the current rate they use, and if it goes down to email him. The current rate for a 15 Yr is 4.375% for a 30 Yr is 5.125%. We also briefly talked about putting the property into a Trust he said that’s more of a concern of the Title company and wouldn’t affect the loan much.
• Property Management Company: Then I interviewed 3 property management companies. (Interviewed is a strong word here really I just called them and ask for their rates and process and if they could send more information via email). The First (1) company charges 6% of Gross monthly rent, a 1/2 month of the first month’s rent as a Leasing Fee for finding tenants, and you have to keep a house account with them with a balance of $250 for any small emergencies. The Second (2) charges 8 1/2% of Gross monthly rent, a 1/2 month of the first month’s rent as a Placement fee for finding tenants, and no house account is required. The Third (3) is my real estate agent, who charges 10% of Gross monthly rent, and that is no placement fee and no house account. They all say they run background checks, and credit checks, do inspections, and maintain a general awareness of the tenant’s behaviors. The differences are number (1) was calm and generally less exciting or salesmanship-like than the number (2) and number (3). Number (2) was very excited and explained they have several houses in that area already and could get premium pricing for the area upwards of $1850 for rent although the average for that area is $1500 to $1600 and the high-end is $1700 to $1850. Number (2) also mentioned tenants have to have 3 1/2 times their income to qualify, plus outstanding debt that they are not paying on their credit report. Also, number (3) my real estate agent was the least engaged and probably does it as a side hustle and mentioned that he would let Zillow do the credit checks and still hasn’t sent over additional information via email. I am less likely to go with them because I need to learn how to do it myself from a company with systems in place and is not just casually looking for people.
• Real Estate Investor in San Antonio: I was able to talk to a real estate investor living in San Antonio and I am basically stealing the playbook wholeheartedly. This person started with a condo Airbnb the second room then moved to a single-family home and purchased a few spots in San Antonio due to familiarity with the area because they grew up there but lived in California at the time. Most recently they purchased a 168-unit apartment complex for $16 million. I asked her to take on finding a property management company. Some key takeaways:
  • Ask how many units they have under management now; the size and scale of the company matter,
  • Do they have access to repair people 24 hours of the day: things break and they’re not always during the 9-5 hours when things break will the tenant be able to get a hold of them at those times,
  • What is their process for work orders like, do they have an online payment portal for tenants, and what is the overall presence or accessibility.
  • We also discussed some of the contract items I should be thinking about putting in such as; are pets allowed because the cat’s pee smell soaks into the paint and I will need the pet deposit to repaint the inside, also dogs are not too much better, number of tenants in the unit should be specified.
  • Most importantly she said to add a clause to the contract that I can fire the property manager at any time for any reason and if they want to fire me they need to give a 30-day notice but they can also at any time. This is in lieu of having multiple line items for performance and metrics to keep track of.
• Then we sort of just catch up for a bit she bought a HUD home for $270K but it needed to be owner-occupied so they are going to move there for 12 months. The process was an auction style and if no one outbid you, the property is yours. I looked up HUD homes in Nebraska there is only one at this time and it’s in Sidney, NE in the middle of nowhere for $57K. I looked up California HUD homes and there were 20 at the time. None in Los Angles or the Orange County area and pricing was the cheapest was 124K the most expensive was $950K. We also talked about the Mill Rate.

July 15th, 2022: I just submitted paperwork through my bank’s portal to push the process further. I also text my Real Estate Agent to see the status of the inspection contingency removal. They are working on it.

July 18th, 2022: The agent texted to say they are doing the requested work and wanted me to sign another version of the Home Inspection Notice (contingency removal) form. Loan Processor emailed to say he received communication from the appraiser that the appointment has been scheduled for 07/19 with an estimated completion date of 08/04. He will need the report in the file by 3 PM CST on 07/22, in order to maintain your closing date, but will reach out to see if the deadline is workable.

July 18th, 2022: Signed another revision of Home Inspection Notice (contingency removal) form from agent. Transfered funds from Brokage to Checkings account.

July 19th, 2022: The agent text me to confirm address for documents to be sent and asked where should the Title company send the notory. I spoke with the Title company over the phone and they said signing documents will happen same day as expected close so July 27th 2022. I orginally thought I cound sign the documents and it would close later. Then later I had 5 documents in the portals:

1. Review Mortgage Loan Estimate Package (pages 5 | 5 signatures )
2. Review Mortgage Loan Estimate Package version 2 (pages 5 | 5 signatures )
3. Proof of Liquidation (needed to be uploaded)
4. Hazard Insurance Policy (Need to find)
5. Lenders Closing Protection Letter (for review by Title company 4 pg)

July 20, 2022: Signed a Mortgage form for revision. Also applied for Home Owners Insurance at Hartford and was declined because you have to be over 55 and a member of AARP to get this coverage.

July 21, 2022: Today the Appraisal came back at $210K I am buying the house for $203K so we’re in the money 7K. However, the difficult part was finding Homeowners Insurance: First, the quote on the loan estimate is $50 per month. So I went through the app first then called USAA and their amount was $193 per month (rough numbers cent are involved). I thought it was high, So I went online and did a quote through Progressive and but they told me to call at the end of the application. I went to Allstate next after the application the quote came back at $130 per month. I called Progressive and apparently they use multiple underwriters and the best quote came back from Formost Insurance at $191 per month but less coverage than USAA. I went to finish my application with Allstate but the website had idled too long and gave me a number to call. After verifying all the information with the representative she told me that they could not offer me insurance unless I bundle my primary and secondary together with Allstate. Since I am moving out of my primary to another primary residence this makes no sense to me and I thanked her and went back to the USAA website. I went to finish the application I started online and then continued with the representative over the phone when I got to the end the amount was $248 per month. I tried to manually adjust or customize the policy but it kept going higher. So I called USAA and asked for the same policy I was quoted a few hours ago. The representative saw that I had several attempts at finishing and was able to find the quote I wanted we went through the same disclosures again and let me know that escrow will be billing me for the amount. But in the end, she said we could lower the monthly bill by $3 by adding a $2000 watch and jewelry coverage. My final amount will be $190 per month instead of $193 but I will be billed $30 directly by USAA so really it’s only a savings of about $6 in the end.

July 22, 2022: What a roller coaster ride of emotions. I sent all the paperwork in yesterday and today they said the underwriter thinks my debt ratio is too high and they need to confirm my previous employment. This will delay closing by a day and I signed a Closing Disclosure. But now I have an underlining fear that I went through this whole process and Navy Fed will reject the loan at the very last minute.

July 25, 2022: Over the weekend I saw that the Navy Federal Rate went down by 0.25% so I immediately emailed my loan processor. Today I re-emailed him the same information with a note to call. He informed me that since will are beyond the 7 days cut off to the close date we cannot change the rate. He also informed me that the underwriters were done with the file and that it passed to the next stage final closed. Which will happen Thursday, July 28th, 2022. Informed Realator and Title company of close date. Had to sign a revision to the offer letter to close on July 28th, 2022. Plus Realator sent a receipt of groundhog removal but it was one groundhog and one raccoon; I saw two groundhogs and no raccoon. A bit of stress over whether will it happen or will it not happen that was felt over the entire weekend is much less now. Late in the day emailed property managers’ companies with some questions.

July 26, 2022: Home from a day at the office and signed another Closing Disclosure again. Property management companies emailed me back some answers.

July 27, 2022: Woke up and signed another Closing Disclosure again (final maybe). I also emailed my loan officer because each Closing Disclosure comes with a cover letter stating to call the loan officer for any questions so there are no delays. I only have 2 questions about overnighting documents and cash benefits. Then my agent asked me to sign another Good Faith form for their records (I signed this form earlier not sure why I am signing again). The title company sends me three documents to review:

1. American Land Title Association Settlement Statement (2pg) This form gave my total amount due including Home Owners Insurance ($2,283), Notary ($200), Pest inspection ($95), etc…
2. Wire Instruction Form (1pg)
3. Loan Documents (78pg) This had items I had never seen in it, including escrow breakdown, Adjustable Rate explanation page, Deed of Trust, and letter from Navy Fed explaining when the first payment is due – 09/01/2022.

Also spoke to the Title company, and one piece of advice she noted was once things close it will be recorded publically so prepare for some sketchy companies to reach out with official-looking letters asking or even demanding money or offering a useless service.

July 28, 2022: Closing day Went to work around 11 am to sign loan documents with the Notary. Signed about 20 times for different things took about 30 minutes. And that was it. It ends unceremoniously and anticlimactic. Keys are in a lockbox waiting for me or the property management company of my choice.

July 29, 2022: The day felt a bit weird I didn’t get any calls or emails or documents to sign from anyone. Now I am just looking for a property managing company. One note; Navy Fed keeps lowering their rate while my bank and every other bank I know is raising their rates along with the Fed’s raising their rate Wednesday by 75 basis points.