The last month and a half have been so traumatizing, I am not sure I want to relive them.  Do you know that when you close a home sale here in Houston, all the parties are supposed to meet around the same table and everyone signs the papers at the same time?  When I found that out, I told the realtor in no uncertain terms that I had no desire to meet with the buyer of my ex-home and I wanted separate closings.  They were very accomodating.  Conversely, when we met with the folks that we bought from, they were extremely pleasant and have been since then, because they are leasing back from us for a month and are already receiving our mail.

Have you calculated that makes us homeless?  Indeed.  

Howdy's most excellent sister found out and offered her home to us, which is where I am blogging from now.  For you folks in Houston, I am now commuting from I-10 and Gessner around the Beltway to 1960 and Veterans Memorial every day.  I am so thankful that it's against traffic both ways.  Can I complain here that Howdy was out of town on moving day and I was alone?  Can I complain that it was Valentine's Day?  Someday, I will look back on this and laugh, but not quite yet.

Two more weeks and then we can move into our new house.   Not that I am counting...(20 more drives...)

First up, let me apologize if you are having trouble reading this.  Blog-city made me change versions at the end of the year and this version is much less user friendly than the last.  I still can't figure out how to change the color of the blog entries titles!  I was thinking of changing to an all-white scheme, but then my little buttons on the right disappear.

Where did we leave off?  Well, there were some comments to my last posting. 
Current debt to income ratio was mentioned by a couple of posters.  Howdy used to make a base of $125,000/yr.  That's how we got into this house.  He had a company furnished car, so we leased my car at $629/mo, our only payment at the time.  When he had to turn his car in, we bought him a used Honda for $346/mo.  That's where the car payments come in.  It sucks, but we weren't really irresponsible about the aquisitions considering the situations at the time.

Home rental is a viable option, except most of the homes in my area that are available are more than I'd be paying if I bought the house, since I have to put 20% down.  I can actually save more money if I buy the house rather than rent it.

Another poster inquired about counter-offering for a home you're selling.  Sure, you can!  You can counter back and forth until you are both satisfied, or someone walks away.

Have you ever had a garage sale where you feel like you've priced everything very fairly and still you have someone come in and try to dicker with you over every single item they are interested in?  That is how I feel our sales negotiations on this home have been.  I am certain that their agent has made them aware that we paid $450,000 for this house and to have them counter offer repeatedly is really demeaning.  The icing on the cake however, was finding the home they currently live in listed at Zillow for $685,000!!  I spoke some bad words about that.  Our last counter was $410,000 and I told the realtor that was as low as we could go and still have a down payment on another place.  They countered twice more after that.  I'm afraid I was less than pleasant with our realtor the last time she called.  She must have forwarded the message, because they finally agreed to our price.

So, we have a signed contract now and they have a few more days to inspect and option out if they like.  We have gone home hunting twice now and find the offerings dismal at best.  There are two possible candidates.  One is larger than we'd like, and it has a pool.  It's at the top of our affordability scale.  It is in a great location and it has a place to park our pop-up camper.  The second house is way at the back of a different subdivision.  It's only one year old.  The backyard is a only a rectangle of grass (very desirable!!).  However, this house is less than half the size of our current one, which will require huge amounts of scaling back.  Price is right and we might be able to even better that.  No place for camper, so at the worst, we'd have to rent storage for it.  Neither option is ideal, and the three of us has vacillated endlessly over the weekend about them.  If all goes according to plan, we have to be out by the 8th of Feb, so we don't really have a lot of time to mull this decision over, either.  I think we're going to wait a couple more days to see if anything new comes up and then bite the bullet and make an offer.

In the karma department, my bestest buddy called me a couple of nights ago and informed me that Howdy's former employer has closed three of his restaurants recently.  It's childish, but I can't help but grin over it.

Feel free to opine at will over this... 

 

So, you would think if we got an offer on our home we'd be jumping up and down, right?  Well not quite yet.  We purchased this house 1.5 years ago for $449,000.  This was exactly the same amount of money that the sellers had paid for it in 1994, so this house wasn't a victim...beneficiary (?) of the housing bubble.  Undoubtedly, we overpaid, but we were tired of looking and it had just come on the market, so the seller wasn't much into negotiating.  I won't include the amount of money we have spent on it already in these calculations.

We made a substantial amount of money on the home we just left, as we had bought it as a foreclosure and put our hearts and souls into the remodel.  As a result of the money we made, we were able to put $100K down on this house.

So the math so far is:
$449,000
-100,000
$349,000 Amount financed.

Since we have been here such a short time, we still owe $343,000 on the loan.

The offer we received was $375,000.  If we sell for this amount of money, after we pay closing costs, we will net about $348,000.  

New math:
$348,000
-343,000
$  5,000  This is the amount of money we will have to put into a new home.

Now, here's where the sub-prime debacle comes in.  Right at the moment, Howdy and I are making $47,000/year gross.  (273% of the 2007 Poverty Guidelines for three persons, BTW)  Ordinarily, with our good credit, we could qualify for a 100% loan, so the amount for a down payment would be a moot point.  Now, since the lending restrictions are tightened, even our good credit won't help, as there are no more 100% loans.  We are forced to put a down payment, preferably 20%.

We have counter offered $430,000.  This will put our net at about $400,000.  Sounds great, right?

$400,000
-343,000
$ 57,000

So then you can assume that if I use this as a 20% down payment, I can afford to finance $285,000. (57000/.2)

Not so fast.  The rules have changed that way, too.  You have to spend less than 41% of your total income on debt.  This includes car payments, charge cards, student loans, whatever. 

amount of new payment + $975 (current car payments) / $3,916 (monthly gross income) = 41%

If you solve this, our monthly payment can be no more than $630.56.  This includes escrowing insurance and taxes.  Not much to be allowed to spend.

Conversely, if I plug my numbers into this calculator, with 6.25% interest over 30 years, I can afford a house of $106,232.46 with my down payment of $50,000!  Doesn't sound very appealing to me.

We thought maybe we'd just rent a home for a few months and after Howdy gets started in his new business and there's some money coming in, we can buy a home then.  The rules have changed there, too.  Used to be, they'd do something called a "no doc" loan for someone who couldn't substantiate their income.  Obviously, this was a place where fraud was bound to occur, so they no longer do those loans.  Now, if you are self-employed, or even draw income from a place that you own more than 25% of, you have to show your income with 2 years of tax returns.  So, if Howdy starts work at this new job as he is slated to this year, we do not have enough documentation to qualify for a loan until our 2009 taxes are filed, in April of 2010.

This puts is in an interesting position.  Ordinarily, we'd be happy about any offer on the house, but unless we can come up with 20% down, we are basically screwed.  Even if we get a greater offer later, once Howdy is self-employed, we are ineligible to purchase a home until 2010.  

So, as I drive around neighborhoods in my area and marvel at the number of for sale signs, I can't help but wonder who is going to buy all of these homes once we have finally hit bottom.  We have excellent credit and possibly the ability to put 20% down and still might get turned down.  My realtor has told me there are 2,000 new foreclosures in Houston every month, and we are one of the least affected areas of the country.  I can't imagine how it is other places.  How did this happen?  Surely it isn't all fraud. 

In a related story, an acquaintance of mine is fairly wealthy.  He lives in a tiny gated community.  We happened to be travelling in his car (brand new Mercedes) and the radio (CNBC on Sirius satellite, of course) was talking about the sub-prime crisis.  He had the gall to tell me he thought the whole thing was an invention of the media and ask my opinion.  Since I knew he would continue living in his little bubble no matter what I said, I asked him about his car.

We have not received any word on our counter offer.  Ever optimistic,  the residents Chez Sockbug will be going out to look at homes to buy tomorrow.  If you have read this far, send mojo with dollar signs, please.  Oh yeah, and forgot to mention, they want to close in THREE WEEKS.  Oh, the fun we're having here!