Wow, three blog posts in one day! I guess it's because I'm going back to Brooklyn tonight that I'm feeling the urge to get stuff out. Anyway, I feel the need to do a summary of the ups and downs of purchasing property Charlie. By doing this, I can better understand what I did right and what I did wrong.
I decided on PPC #3 after looking at the only two “4-units or more” buildings that were available in my price range. I made my decision and wanted CFB Mortgage to do my application. Marvin Wassle told me about Empower and I had another decision to make. I first went to CFB to fill out an application but made sure not to let them do a credit check until I spoke with Empower. Empower’s application process was much easier and was able to get approval online. Then they said, because the application was in my name while the money for the property was in my business account (not in my name), I would have to open a personal account and have at least two months of bank statements before they could go further. Feeling that two months is forever, I decided to go with CFB Mortgage instead.
At first, I was denied because my credit was a 637 and they need at least a 640 to work with me. After several weeks of paying off the Dell debt and leaving a balance on my secured credit cards, my credit jumped to a 652 and I was approved! The joy was short-lived, however, as CFB had a problem with the two late mortgage payments I had all the way back in 2008 and denied my application altogether, even with an excellent Letter of Explanation. So it was back to Empower where I started the application process again. For security, I also applied with BJ Bank in case Empower pulled the same shit that CFB did. Thankfully, Empower made the mortgage buying process pretty easy and, within two months of the second application, property Charlie was mine. And I paid almost $6000 less than I would have if CFB approved the loan.
The first issue is that I should have known what my credit score was before I even started looking for a place. Credit Karma’s credit score is unofficial, and the 648 that they assumed was clearly off. Secondly, I shouldn’t have done an application with so many banks. If I know I’m shopping for a mortgage loan, I have to apply to three or four banks within the same week, so that it looks like one big credit check instead of four or five. I did four separate applications at different times, which resulted in 4 hard inquiries on my credit report that I’m sure will hurt a bit. Finally, I should have stuck with Empower. I had it in my head that, for some reason, mortgage brokers were the best way to go because they deal with people who don’t have great credit all the time. I figured the higher interest rate they demanded was a tax for them taking a risk with a “sub-prime” applicant. But I was wrong. Empower had no problem with my credit score the first or the second time I applied. So I guess I’ll have to do better research when I make my decision to purchase the next property.
1) Run a free annual credit check so I know how the banks will see me and what I will qualify for
2) Have documents ready: 2 months of pay stubs, 1098s and mortgage statements from the properties, income/expense for each of my properties, personal financial statement, 2 months of bank statements and 1040s, and info on the property that I want to buy-- including existing rents and sale price
3) Search for the right mortgage and ask the right questions to see which is best for me--then pick ONE
4) Give them whatever they need, trust the mortgage process, and stop panicking
All in all, it was a pretty good learning experience and I learned a lot. The most important lessons I can take from this is to be patient, do better research, and stop making panic decisions. It didn’t help to have Ferret Real Estate’s Prius and Condi hanging around and messing everything up. Thankfully, I had the right lawyer and accountant that I turned to for good information. I’ll have to lean on them harder next time, as my next property should be a commercial purchase (more than 4 units). Commercial purchases are, from what I’ve been told, a completely different game with new rules, larger down payments, higher interest rates, and many more expenses. But the lessons I’ve learned from getting property Charlie are universal, and will definitely help me make my next purchase easier.
P.S.: On a very nice note, Prius texted me yesterday to say that Ronnie Mud is refusing to pay them because a part of the National Grid utilities is still in his name. I have been trying to get National Grid to fax me the application needed to transfer utilities but they never do it. I'll try again today, but it's just nice to know that they are getting shafted from the same guy they were laughing and joking with during the closing, giving me a headache that day. Not so funny now, is it?
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