‘œThe most important work you and I will ever do will be within the walls of our own homes.’ ‘“ Harold B. Lee

By the fall of 2001, I’d lived in my travel trailer for nearly four years.   My wife had shared the space with me for nearly three, and we were pretty tired of the RV life.   We were sick of the lack of space, which was exacerbated by the fact that we were also running a home-based business.   We had only 176 square feet of space for our business and personal lives, and it just wasn’t enough.   We were tired of stepping on each other, and having to move computer equipment around every time we wanted to sit down for a meal.

We started to investigate our options.   We thought that moving into a rented house or apartment would be our best bet.   To our surprise, we stymied by our less-than-stellar credit.   Even worse, we faced the additional burden of being self-employed.   Without two years of tax returns, no landlord would consider us, especially I still had my dog.

We called every rental agency and landlord we could find in town.   They all turned us down flat.

Desperation breeds creativity, so we even went as far as to contact our local agencies who help the homeless.   By our county’s definition, we were technically homeless.   We were living in a trailer that wasn’t designed for full-time use, and we were staying in a campground that allowed long-term renters, but didn’t allow anyone to establish permanent residency.

It turns out that even the homeless agencies couldn’t offer us anything.   We were told that the homelessness problem in our county was so severe that they were only helping families with children.   Singles and couples (married or not) without children were basically on their own.

We considered many options.   We looked into renting office space or buying a bigger RV, but couldn’t qualify because of our bad credit.   Moving in with friends or relatives wasn’t an option.   We resigned ourselves to the fact that we were stuck.

Seemingly out of the blue, a friend introduced us to a ‘œfriendly’ mortgage broker.   This was in the early days of the mortgage boom, and this particular woman prided herself on being able to get anybody into a home, regardless of credit history, the size of their down payment, or job history.

It sounded too good to be true, and in many respects it was.   The broker tried very hard to convince us to opt for an adjustable rate mortgage.   We refused, insisting on a fixed-rate, 30-year note.   She finally found us a deal ‘“ a stated income, no documentation loan at a whopping 8.25%.   All we needed was a 5% down payment (which we could barely scrape together) and we’d be all set.

So we bit.   In September of 2001, we made an offer on a tiny 3 bedroom, 1.5 bathroom house.   Shortly afterwards, the 9/11 disaster hit, and we seriously considered backing out of the deal.   After considerable discussion, we decided to move forward, as we didn’t want to lose our earnest money.   By the end of the month, we were moved into our new home.   The last thing our broker said to us was, ‘œCongratulations on your new home.   Now, don’t let this house foreclose!’

Her comment struck us as rather odd.

The first year we were in our house, finances were a bit of a struggle.   Our high-interest loan, plus the Private Mortgage Insurance and property taxes made our house about 1.5 times more expensive than a similar rented property.   We realized we were paying a premium for our bad credit and self-employment, so as soon as we could, we refinanced the house.   Fortunately, real estate prices had skyrocketed, so we were able to eliminate PMI. Now, our combined mortgage, property tax and insurance payment is comparable to what we’d pay for a similar rental.

When we refinanced the house, our new mortgage broker asked us a puzzling question.   ‘œAre you still working for the same employer?’   We answered in the affirmative, to which he replied, ‘œSo you are both working as doctors and each making $100,000 per year?’

Needless to say, it shed quite a bit of light on our previous broker’s final remark.   She had, without our knowledge, altered our mortgage application and lied.   We explained to our new broker our actual circumstances, but by then we had sufficient proof of income and improved credit to qualify on our actual income.

Eight years later, the real estate market has dropped considerably, and we are now upside-down in the loan.   We owe about $23,000 more than what the house is worth, but we aren’t panicking.   Our house payment is still comparable to what we’d pay in rent, so we plan to stay for the long haul.

Lessons learned:

1.       Bad credit is like an albatross hanging around your neck. Between my prior bankruptcy and my wife’s prior carelessness in paying her bills on time, we found that it made it impossible to rent an apartment or office space.   Although it didn’t prevent us from ultimately owning a home, it made it much more difficult.   Had we been trying to buy a home now, the more stringent mortgage qualification rules would have locked us out.   Guard your credit rating carefully and do all you can to improve it as quickly as you can if you run into financial trouble.

2.       Where there’s a will, there’s a way, but it’s not always pretty. Although my wife and I did eventually find a way out of our RV lifestyle, it was an expensive out.

3.       Just because someone says they can help you, doesn’t mean it’s always a good deal. Although our first mortgage broker did what she promised and got us into a house, it wasn’t a very good deal.   If we’d been willing to wait longer, we might have been able to save a larger down payment, improve our credit, and qualify for better loan terms.

4.       If somebody tells you they can do something nobody else can do, be suspicious. Although our broker’s lie didn’t get us into trouble, it could have.   If our mortgage had ever come under scrutiny, potentially we could have been charged with fraud, and would have needed to prove that our broker altered our loan documents without our knowledge.

Next in Series: Better Preparations

Photo credit: stock.xchng