My $1 Million Mortgage Journey . . . Here We Go!

[Anonymous]

I can't express how helpful this entire thread is!

Thank you very much for your diligence towards walking us step by step with you during your mortgage journey thus far!

[youdontkillmoney]

5/25/16 (9:00PM): The seller's agent of the home we have been negotiating (Listed $989K, dropped to $949K after 30 days on market) counteroffered our initial offer of $820K. See previous posts above. The counter:

Seller’s Agent Counteroffer: $945K

Seller's agent wrote:

"Sorry for the delay

I do thank you again for the offer, please find our clients counter offer of $945,000

The house behind us, one story, was listed at $899,000 but it is in escrow over $900,000 and it is only 2,200 plus sqft

As I mention, this is high end community

Please call me with any questions"

I will counter with $855K (since the difference between their counter of $945 and my $855 is $90 which is the approximate cost of needed renovations) and also send in my $1 million Wells Fargo "credit approval" letter "underwritten" by Wells underwriters. My tactic changed, now I want to show we are serious buyers and are approved for $1 million. Does not mean I want to spend $1M for the home. What will probably happen is the seller will reject our $855k, and counter with (after seeing our $1M credit approval) somewhere north of $900K still (I think this is where they think the "support" is for the price of their home), I will then counter with $865. If they reject it or counter with something still higher than $865K, I will counter again with my "best and final" offer of $875k and keep shopping. BUT I planted the seed in their minds that I am a serious buyer with a $1 million credit approval so they will keep me on their short list of potential buyers and perhaps if they are desperate enough over time, will contact me with an offer again since we are good for up to $1M. It's about who gives in first, wears out first. The seller's are probably paying two mortgages, HOA fees for the home, and who knows what else. They are trying to unload the property for over 30 days.

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Still apping with Sofi for a $1M purchase price mortgage as one of my backups, they asked for more recent bank statements and also a letter of explanation:

Signed letter explaining the credit inquiries from 0512 INSTANT HOME LOANS on 5/21,Cap. One on 5/21 and WF Mortgage on 5/3. Looks like you were just checking mortgage rates. Please upload the signed letter into the website.

I will submit a letter explanation confirming the above, I was mortgage rate shopping.

[Anonymous]

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@youdontkillmoney wrote:

5/25/16 (9:00PM): The seller's agent of the home we have been negotiating (Listed $989K, dropped to $949K after 30 days on market) counteroffered our initial offer of $820K. See previous posts above. The counter:

Seller’s Agent Counteroffer: $945K

@Seller's agent wrote:

"Sorry for the delay

I do thank you again for the offer, please find our clients counter offer of $945,000

The house behind us, one story, was listed at $899,000 but it is in escrow over $900,000 and it is only 2,200 plus sqft

As I mention, this is high end community

Please call me with any questions"

I will counter with $855K (since the difference between their counter of $945 and my $855 is $90 which is the approximate cost of needed renovations) and also send in my $1 million Wells Fargo "credit approval" letter "underwritten" by Wells underwriters. My tactic changed, now I want to show we are serious buyers and are approved for $1 million. Does not mean I want to spend $1M for the home. What will probably happen is the seller will reject our $855k, and counter with (after seeing our $1M credit approval) somewhere north of $900K still (I think this is where they think the "support" is for the price of their home), I will then counter with $865 and that'll be my best and final offer. If they reject it or counter with something still higher than $865K, I will counter again with my "best and final" offer of $875k and keep shopping. BUT I planted the seed in their minds that I am a serious buyer with a $1 million credit approval so they will keep me on their short list of potential buyers and perhaps if they are desperate enough over time, will contact me with an offer again since we are good for up to $1M.

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Still apping with Sofi for a $1M purchase price mortgage as one of my backups, they asked for more recent bank statements and also a letter of explanation:

Signed letter explaining the credit inquiries from 0512 INSTANT HOME LOANS on 5/21,Cap. One on 5/21 and WF Mortgage on 5/3. Looks like you were just checking mortgage rates. Please upload the signed letter into the website.

I will submit a letter explanation confirming the above, I was mortgage rate shopping.

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I like this plan... Also good idea on the SoFi loan.  Always have a plan B and if possible a Plan C.  Moving along nicely...

[youdontkillmoney]

Realizing the importance of liquid cash for downpayment/closing costs (I should have done this at least back in Jan. 2016 or sooner but thought I can do it all), we used to max out all of our retirement accounts. I reduced or eliminated contributions at least until the end of this year or after we buy a home. #1 we need to focus on building cash in our bank accounts. Yes we've been "credit approved" by Wells Fargo underwriters and all the other lenders (4 of them) I apped with gave pre approvals for $1M purchase price, but I want to be in an even Stronger financial position when we are in contract for a home and that means more cash in our bank accounts. I did this yesterday:

1. Wife's 401k: reduced contribution from 13% to max at $17,500 to 6% (minimum to get employer's match to not leave money on the table). Bi weekly it was $692 a month so it should be half that now.

2. Reduced my 401k contributions from $17,500 a year max to zero. No employer match.

3. Eliminated my $250 a month Vanguard variable annuity contribution.

4. My employer sponsored annuity was $400  a month, reduced it to $5 a pay period or $10 a month just to keep it active (minimum is $5 a pay period) so when I bring it back up I can raise it to $200 a pay period again instead of re-opening the account if there are zero contributions.

5. Eliminated $916 a month in IRA contributions ($458 in each of our 2 IRA accounts) into mine and my wife's IRA since that was to max out at $5,500 a year (though we make too much to get deductions). I am already seeing more money in my bank account because usually 6/1/16 the $916 would get deducted by the IRA accounts, but since I cancelled auto deduction for IRAs, I just transferred $916 into my main checking to save towards down payment/closing costs. Nice to see immediate results/savings.

6. Every 2 week pay period I withhold an extra $300 in Fed. taxes and $200 in state taxes, so $1000 a month total from my paycheck. I completed a W2 and cancelled this, so now my paycheck will be bigger from not giving Uncle Sam a free loan and save this for down payment / closing costs.

This is one of the reasons we did not have as much liquid cash as Wells initially wanted to see before an Exception was granted, we maxed out all of our retirement accounts.

I understand (unless we buy a home this year and deduct mortgage payments from taxes), that all the above changes may affect our tax refunds we usually get $13K a year; so it will go down or maybe we will owe taxes or break even.

Anyway, the point of this is, even if you are preapproved for your mortgage loan, finish Strong at closing and be in an even Better financial position than initially at preapproval, be proactive about it and plan; focus is building cash savings and minimizing expenses until keys in hand hopefully by end of 2016, then we'll go back and max out all retirement accounts again Jan 2017. ALso ensure current file stays the same or better (i.e. credit report, etc)

[youdontkillmoney]

5/27/16 (10:04PM): The seller's agent of the property we are countering back and forth on replied:

"I appreciate your respond

It is forwarded to my sellers

My seller will continue negotiations once you have number 9 in front

I totally understand where your clients are coming from, but seller is not letting go home in this price range

As I mentioned, this is high end community and totally different prices from homes south of Valley Circle or the new once that are build on questionable soil and they do not belong to all three good schools

If you take in consideration location, year build and also home is in need of new appliances only

Please let me know if you want to revisit home again"

I advised my broker to thank them and we appreciate their position as well and leave it at that. My take is that either the market will support their "$900K" support level or not, and if not, they know we are credit approved for $1 million and they may reach out to us in the future. In the meantime onwards with the home search process . . .

[Anonymous]

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@youdontkillmoney wrote:

5/27/16 (10:04PM): The seller's agent of the property we are countering back and forth on replied:

"I appreciate your respond

It is forwarded to my sellers

My seller will continue negotiations once you have number 9 in front

I totally understand where your clients are coming from, but seller is not letting go home in this price range

As I mentioned, this is high end community and totally different prices from homes south of Valley Circle or the new once that are build on questionable soil and they do not belong to all three good schools

If you take in consideration location, year build and also home is in need of new appliances only

Please let me know if you want to revisit home again"

I advised my broker to thank them and we appreciate their position as well and leave it at that. My take is that either the market will support their "$900K" support level or not, and if not, they know we are credit approved for $1 million and they may reach out to us in the future. In the meantime onwards with the home search process . . .

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Good strategy.  How long has the house been on the market?

[youdontkillmoney]

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@Anonymous wrote:

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Good strategy.  How long has the house been on the market?

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^^^^

The house has been on the market for 37 days so far, initially listed at $989, dropped to $949 a couple of weeks ago. I was reading online forums just now on buyers regrets after closing, which just makes me more cautious and not rush into something. I also am reminded from the forums, to ask for the HOA policy if there is one since some buyers in the forums complain of the rules/limitations of what's required such as cutting grass to certain length, etc. During this negotiation I should have asked for the HOA policy. I'll remember next time.

[tacpoly]

Congratulations on the mortgage from Wells Fargo!  Your loan officer did an excellent job for you. 

I didn't realize real estate in SoCal was so weak that you can offer 820K for a 950K ask -- or is it just the area you're looking at?  This is good information, thank you.  I've never bought in an area where you can offer less than ask.  Our real estate broker even had to write an essay about how we were perfect for one property  

[youdontkillmoney]

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@tacpoly wrote:

Congratulations on the mortgage from Wells Fargo!  Your loan officer did an excellent job for you. 

I didn't realize real estate in SoCal was so weak that you can offer 820K for a 950K ask -- or is it just the area you're looking at?  This is good information, thank you.  I've never bought in an area where you can offer less than ask.  Our real estate broker even had to write an essay about how we were perfect for one property  

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^^^^

Yes the Wells lending officer after first giving me the bad news that underwriting would not approve me, a few days later called me and said he really believed in our profile and he did the right thing by us, not for the money I really do not believe but because based on all the people he's processed, he believed we were not being rated correctly by the underwriter and went above the underwriter to her boss, and did right by us.

So Cal real estate is not weak actually it is a seller's market, but we can offer any amount we feel is appropriate and see what happens. The seller eventually said with our last $850 offer that the seller is willing to start negotiations again if we offer starting at $900. I don't think the property is worth $900+ so I stopped counter offering, maybe I'm wrong but I just started my home search so in no rush. I'll keep looking...

[Revelate]

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@youdontkillmoney wrote:

QUESTION: By the way, Wells did a mortgage credit pull on 5/4/16 or so, Capital One today 5/21/16 and perhaps next week by May 27 the other lenders above (US Bank and 2 mortgage broker lenders and SoFi) will do pulls also, it will all be within a month, so all these hard pulls will count as "one" for mortgage purposes? I heard various time frames, 14 days, 30 days, 45 days for mortgage inquiries to count as one?

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My apologies, been busy with work and school and other stuff not this forum.  Take home final 4.5/5 easy, and one stupidly hard integral that gives a Mathematica result I've never even heard of before... oh fun.

Anyway, de-dupe period for FICO scores used in mortgages:

EX Risk Model v2: 14 days

EQ Beacon 5.0: 30 days

TU Classic 04: believed to be 30 days; however, TU documentation suggests 45 so not sure, very hard to test it.

Anyway inquiries are trivial and unless you're Romancing the CU's or JCB you're seriously unlikely to stumble across EX RM v2 outside of your mortgage chasing anyway; what you're looking for in this case is the grace period: all mortgage-related inquiries are excluded completely from scoring for a period of 30 days which covers you anyway in this case.

Am sorry to hear of your WF experience, but at least they got on that hard and fast comparitively.  Not really understanding their not accepting the retirement accounts as reserves, though cash for closing yeah I can see their wanting that.  Anyway sounds like you're making the right moves and it hasn't derailed you yet, so keep trucking senor... though I'm seriously suprirsed at your lowball offer from what I know of the California market where you're looking unless it was seriously overpriced.  15% discount?