Lien Search It’s a search to make sure there are no liens filed against the stock so when you take title there aren’t any judgments unpaid which would transfer to you.
Basically, you don’t do this, then you could find out later you have to pay someone else’s debts. My thinking is that no mortgage company will give you a loan without one being conducted, and no lawyer worth his salt would let a deal go down without one, but it’s still good to know what the hell it is (I certainly didn’t).
Last night we put the finishing touches on our co-op application package. (See pictures). You can get an idea of all the crap that goes into. I’I've been incredibly anal in trying to keep organized (probably making the broker’s life a lot easier than necessary).
It’s kind of an odd feeling to see your entire financial life put into two giant binders. But I also have learned the value of being organized and just keeping stuff in binders as they come in. Although, now I think we are going to be digital with everything, and only print when necessary. It’ll save physical space and be good for the environment. That is unless of course Tyler Durton does one of those things where he takes out everyone’s credit histories and all the banks, in which case it won’t really matter anyway, since we’ll have this abominably huge book of our financial life.
Now we pass this thing off to our broker and he gets to have fun and go through it all to make sure we have everything. Then he shows it to the seller’s broker, and if they agree everything is there, they go ahead and make 5 copies for the board. Then they submit that plus $1,000 of our hard earned money (which we hear we might get back) and soon we’ll have our co-op interview.
So the phone rings today and it’s a 718 number. I think maybe it’s my broker, or perhaps even someone from the new co-op. I get excited. But it’s actually a different broker. The one who we were working with the time we almost bought the condo. The one I’m convinced tried to play us against the other buyers to drive up the price. I decided not to use her again because I felt she was dishonest, but that’s not the point of this post.
She called to follow up and see if we were still looking and I thanked her and told her we had found a place. She asked me the address and I told her and she laughed and said that it was her building. I asked if she meant she sold a property there, she said no, she actually had lived there in the first apartment for 10 years. I was like, wha….
So Amanda and I are making significant gains on reaching everything for our closing. Maybe this part is boring, but words can’t express the pain in the ass it is to get all your shit together. I can’t say it again: Save all your bank statements and put them in a banner. Or better yet, go paperless. Most banks will reward you by letting you keep up to 7 years worth of statements on online so when the time comes you can print them and have them.
We are currently missing about 6 months of statements on about 6 accounts and the bank normally charges about $6 per statement (wait a sec, 6-6-6…buying an apartment is the work of the devil!), so when we went in yesterday to ask for those statements we tried to get them to either reduce the charge or waive it altogether. The verdict is out on that.
In the meantime, we got our W2s in order, figured out our assets/liabilities sheet, and even got our mortgage commitment letter. It’s a good time to buy an apartment in terms of mortgages, b/c with drop from 7.25 to 6.50; we are looking at savings of about $400-500 a month. Not bad at all.
Once we get the rest of the bank statements and I finish my OCD need to put everything in laminated bindered pages, we can meet with our broker and send things out. Then we will schedule the board meeting and arrange for a closing date.
As the date draws nearer for our exit from our current pad, the reality of moving starts to settle in more and more. It will definitely be weird to leave the place we’ve spent the past 3 years of our lives. We moved in, ‘in sin’ and then as an engaged couple and now married for the past 7 months (to the day). Lots has transpired here, so it’ll be bittersweet to leave. It’s odd that we’re now thinking about piece mealing our apartment, selling our blinds to one friend, trying to sell our TV to another. Amanda informed me the other day that certain paintings or pictures wouldn’t be making it to the new apartment, so in an attempt to bring Mr. T in pearls and Napoleon Dynamite to a new home, I’ve taken them to my office. It works anyhow, since the walls in my office are bare.
That is all for the moment. We’ve been wanting to venture down to Brooklyn more and stroll around but the subzero temperatures are keeping us indoors. Once it warms up, we’ll hit it up again.
Despite all our efforts to get things in order as soona s possible, there have been tons of questions that we have not had answered regarding the co-op application. They’ve asked us for statements going back two years and what not for 401K, bank accounts, etc. and we keep needing clarification on things. It’s not that we can’t get them, it’s just that we need to know.
For us to get two year bank statements (how many twenty-somethings save their receipts?) we will have to order them from the bank. Guess how much they are per statement? $6. That adds up. Luckily we can get the past year on line, but still it gets to be much.
So we were a bit confused to get this email from our broker saying:
“Also, it may be that the ______ may be able to close earlier in the month of March so the sooner we get the Board package completed, the better.”
Huh? If we are looking to expedite this why is it taking so long to get answers from the sellers broker? I would think they’d respond asap to any questions we have.
We are getting down to the nitty gritty, getting everything in order to get everything in order to get this damn thing done.
One of the things still outstanding is the mortgage commitment letter. As I've stated before, getting this together is a project in itself, and we almost have everything except for one small detail, that being Amanda and I forgot to sign Page 1. that will happen tonight.
Last night as I read over the document I had noticed we were getting a 7 year ARM mortgage, which I was confused because I thought we'd go for a fixed. So i e-mailed my guy and asked him if he could explain the difference and why we would want over the other.
So i present to you what he told me, and in case you're wondering what type of loan you might want to get, here is what you need to consider going in:
1)How long you think you might live in your place (is it big enough that you would stay over 10 years and raise a family)? 2) Even if you don't think you'll live there for more than 5-7 years, do you think you might keep the property as an investment?
And here we go...
There are generally two types of loans. Fixed Rate, and an Adjustable Rate Mortgage, or (ARM), hence the title of this post.
1. A Fixed Rate Mortgage (FRM) has a rate and payment that will not change over the life (30 years) of the loan.
2. An Adjustable Rate Mortgage (ARM) has a fixed rate for a given period (3,5,7,or 10 years) and then adjusts within limits annually up or down based on Treasury Bill rates for the remainder of the term totaling 30 years.
3. The rate associated with a FRM is typically 0.5-0.75% higher than an ARM because the bank is guaranteeing the rate for a longer period and therefore assuming more risk and charges for that risk. (Imagine rates going astronomical and the bank is screwed because they can't adjust the rate).
The rule of thumb in deciding which way to go is to think about how long you will own the property. Assuming you will only live there between 5-10 years, you would be paying more over the life of your ownership with a FRM because you would really not be taking advantage of the benefit of the extended rate guarantee. If you expect to stay there more than 10 years then you should probably take the FRM.
Taking an FRM if you are going to stay less than 10 years, is sort of like buying more than you need, (and never using it). If you decide later that you want to stay longer, you can always refinance without penalty. Sometimes if the rate gets to a place that the banks are happy with, they may offer you a fixed rate later down the road.
For our purposes, we are going with the 7 year ARM. Basically, we spoke today and we realize that while we do want to have our children there and have them go to the school in the park slope school system, I can't imagine having w kids around the ages of 9 and say 6-7 all in our apartment. At some point in that time frame, we will probably look to move. (Look forward to www.buyingyoursecondapartmentsuckstoobecausefirstyouneedtosellyourapartment.com)
The next question is whether or not to opt for an Interest Only option. This is a variation on the ARM that permits you to pay only the interest with an option to make principal contributions whenever you wish.
The upside: you control your cash flow better on a month to month basis and when you make any principal contribution, the loan will recast so that the interest charged in ensuing months will be calculated on the outstanding balance.
The downside: the rate is about 0.25% higher than a fully amortizing(Principal plus interest) loan, but the savings in interest based on the recast feature usually negates that.
A hugely positive thing about interest only loans: Your required monthly payments are lower and younger borrowers who are upwardly mobile (love that term) usually like the freedom of structuring their cash flow at the beginning of the loan and then make principal contributions as they acquire more liquidity. Win win.
OK, so what does it mean that we have a 7 year ARM?
It means that rate we lock in now is actually fixed for 7 years, and in the 8th year it adjusts annually based on the market differential from the initial rate. This way, if you don't plan on staying in your pad for more than 7 years, you most likely won't have to deal with this issue. We asked our broker if he thought we should go for a 10 year ARM, and he told he didn't recommend because there isn't enough of a rate difference between that and the 30 yr fixed to be meaningful. If you're thinking about the 10 yr ARM then take the 30 yr fixed.
Finally, if you're wondering to yourself, 'well what if i stick around for more than 7 years, and my rate does change, how high or low can it go? The legal cap is 2% per year limited to a lifetime cap of 5% from the initial rate. So theoretically, if you start at a rate of 6% on a 7-year ARM, by year 10, it could go as high as 11%. But...you can also factor in the amount you'll save during those first years against the increase. I know, it's kind of enough to make your head spin, but hopefully some of this makes sense.
Well...now that that is done...all we gots to do is sign a piece of paper to get our mortgage commitment letter, then put the finishing touches on our application (still waiting on credit reports and some straggling W-2s, oh yeah plus we need to get them copies of ALL our bank statements from the PAST 2 YEARS, plus 6 months of 401Ks, this shit is ridiculous) and then we'll have a home soon.
FYI the average person in NYC lives in their initial home for about 5 years before upgrading or moving out of the city
