I Bought My House for Less Than $2,000 Out-of-Pocket

About 5 years ago, my girlfriend and I purchased a house and only paid about $2,000 out-of-pocket to get into the home. This is the story of our experiences and how it happened. It involves a little education, lots of effort, and a little luck, but it can happen to anyone under the right circumstances and if you know how to deal with mortgage brokers.

For several years my girlfriend and I rented apartments to call home. My girlfriend and I decided one day that it was time to make the jump and buy a house. Back then, the economy was experiencing the best of the real estate bubble, and while it didn't feel like the right time, we realized that there really isn't going to be a good time. We just have to make that jump and do it, come what may.

We didn't take the decision lightly as we realized that we will need to get our act together to make the purchase go as smoothly as possible. Hell, to make it happen at all! Our credit was good, but it could be better. We decided that we should clean up our respective credit files to ensure there are no bad marks, and if there were, see what we can do to get them removed.

We also realized that we needed to understand the process of purchasing a house a little more than we did already. While my girlfriend has had many years of experience funding loans for a few major mortgage companies, I had no experience to speak of, and that personally made me a little uncomfortable. I felt that by filling the holes of knowledge I had regarding the purchasing process would benefit both of us in the long run.

Start Learning

The first thing I did was enroll myself in a class for the California Real Estate Brokers exam. I learned all about the process and actually more than I cared to know about properties and real estate in general, but it was good knowledge anyway. I'll take knowledge however it comes.

Taking the class helped me understand the angle a real estate broker would approach a deal like this. Since most of the brokers I met were not so far removed from being a used cars salesman, if that wasn't their second job already. Turns out that was the most important thing I could do. I'll explain that shortly.

I considered taking the actual exam at the end, but realized I would never really need it or use it in any professional capacity, so I saved my exam fee expense and never took the test. I kept my flash cards though.

Change Things to Learn More

The timing couldn't have been better to switch my life around a little. I was pretty bored with IT and all the needless politics that go with it and wanted a change. Since my girlfriend was in the mortgage industry, I thought it would be good to learn a bit of the mortgage industry as well. After all, that's where the money comes from and the loans are made right?

At the time there were many different loan programs out there, but I had no clue how they worked or why someone would choose one program over the other. What I wanted to do is take a sabbatical from IT to dive headlong into the mortgage industry; the goal being to learn more about the process. I quit my job and began looking for another.

The first job I found had me cold-calling over 700 unsuspecting people daily, trying to get them to give me a social security number. Can you believe it? They wanted me to run through a script so that they could obtain the persons social security number! Why would they do that? I learned later that once they have your social and run your credit, they are more likely to secure a loan deal. Why? Too many inquiries will limit your ability to pass underwriting in the mortgage process. Therefore you will not be able to 'shop around' because each mortgage broker you go to will check the number of inquiries. Too many makes you look bad, thus forcing you back to one that has already pulled your credit. I stayed there for about 2 days and then walked out. The shop was Loan Now in Costa Mesa California, and they're a shady bunch. I would avoid them at all costs, if they even still exist. I don't think they do.

I continued searching around and finally found another job at Homecomings Financial, a GMAC company. Finally, a decent company to learn from! I started on the lowest rung, but my experience in business, IT, and my entrepreneurial spirit coupled with my ability to pick up new tricks quickly paid off big time. Within the first week I was training with the existing Product Specialist, learning all about all their loan programs, taking calls from brokers, qualifying people for home loans, and learning how to price loans. “Pricing a loan” is the act of determining what the borrowers rate will be on the loan. Throw a rate sheet at me and I'll price any loan for you.

I stayed there for about 9 months and learned a lot from them. I can never thank them enough for allowing me to come in and learn what I needed to learn, albeit I never shared my true intentions with them. Sometimes you need to work the system to get what you want from life. Especially when it comes to the biggest financial deal I'll probably ever do in life. I don't regret a minute of it.

Find a House to Make a Home

Armed with the knowledge of loan programs, how the mortgage process works, and an idea of how much money we'll need, we started looking for a home, again. During the entire time we were looking, and a few times we thought we found the home we were looking for. Unfortunately, the initial homes we looked at never panned out and in the end we both learned more about the front-end of the real estate process, also good knowledge, however, it's the loan that's the most important part of the deal. (That is not to say that researching areas and ensuring you aren't buying a money pit isn't important too, because it is)

I found my next job at Quest Software and raised my pay back to what I considered 'normal' pay. My paycheck took a huge hit when I left IT, but I felt it would be worth it in the long run. Another reason why I only stayed for 9 months; ultimately my well ran dry and I needed to refill the coffers.

We started looking again for a home once I was settled into my new job. We looked everywhere and made a few offers that didn't work out. We continued on and ultimately found a house we fell in love with. It had a pool, partially rod-iron gated front lawn, 3 bedrooms, 2 bath, 1600 sq. ft., nice little back yard and a total lot size of 7000 sq. ft. Nice neighborhood and was all done up and ready to move in.

We made an offer on the spot, we were in love!

The sellers had three offers to choose from, our being the least desirable since we didn't put any money up-front with the offer. The sellers took the offer that gave them $15,000 over the asking price and came with a promise to close the deal within 10 days. We knew they could not possibly close in 10 days, so we let them know up front that when that deal fails, please give us a call. The sellers were obviously being greedy, which ended up costing them even more.

14 days later, we were contacted and asked if we wanted to continue with our offer. hahaha! Success! Of course, no one can promise to close a mortgage deal in 10 days. Anyone that says they can is full of it, don't believe them.

Start the Paperwork

When we did up the purchase agreement, we vowed to close by a certain date, one that we knew we could make. We also agreed to pay the owner $100 for each day that we go over the closing date.

Since my girlfriend had worked with several mortgage brokers, we went with one that she felt did things right for their customers. Boy, were we wrong.

The deal was rolling, so we put together all the documentation and information the broker could ever need. We've both been through the mortgage industry and at this point, even I knew what the mortgage company would need for supporting documentation. Whatever we miss will simply be requested later.

The whole package ended up being 90 pages (including fax cover). We faxed the 90 pages over to the broker. She had also confirmed that the fax was coming in, so we assumed that everything was on the right track.

We prepared and busted our ass to try to be as complete and thorough as possible since we had committed to a date, and anything beyond that date would cost us money. The broker was supposed to submit a “full mortgage package” to the mortgage lender, which was already in her hands thanks to one large fax, but instead, the broker just submitted a shell package (not the complete package, but at least enough to get the ball rolling on the lenders side).

A few days had passed, and by this time we were looking for our initial disclosure papers to come in the mail from the mortgage company. We have not seen them, and after a few more days, things were becoming a bit more worrisome.

Real Estate Broker Lies and Deceit

We called our broker and she smoothed things over saying everything is moving along. If that were true, we would have received our initial disclosures from the mortgage company! Needless to say, our phone calls to the broker came more frequent, and she ultimately quit returning our calls, forcing us to try to determine exactly what was happening, and if there was something we could do to make what appeared to be the start of failure into the start of something better, like possibly buying a damn house?!?!?!

Finally, a week or so later our disclosure paperwork arrived. By this time we were really, really pissed. By law, when you submit an application for a home loan, disclosure paperwork from the mortgage company HAS to be sent from them within 3 days. The fact that we didn't get them until weeks later revealed that the broker took her lazy ass time to submit the package. We were on a deadline, and they knew this!

With the lender disclosures in hand, we obtained the number of the mortgage company, and the name of the person processing the paperwork. We called them directly, and acting as any other broker would, we inquired on status of our loan.

The processor revealed that she had only received a shell package, and that nothing else had been received yet.

WHAT?!?!?! We gave our broker 90 pages of documents, and that should all be with the loan processor! Why isn't it there?

We called the broker, and all she would say (when we finally got her on the phone) is that she HAD sent everything over and that everything is going fine. She didn't yet realize that we had already spoken to the mortgage company and that she was now digging herself a hole to jump in. This bitch of a woman apparently decided that blatant lies were going to get us off her back. She was very, very wrong.

We told her we spoke to the processor at the mortgage company, and that the package was missing all the supporting documentation we had supplied to her days earlier.

She stammered a bit, put us on hold a few times, but in the end, she asked us to fax the documentation again.

That wasn't going to happen, not again. At this point, we decided to take things into our own hands. Time was running out, and by the time this deal closes, we'll owe more money to the seller because we will have passed the deadline we had committed ourselves to. This was not good.

Broker? Who Needs A Real Estate Broker?!?!?

We called the lender again and got the correct fax number and faxed our documentation directly to the processor herself. We cut out the broker middleman because quite honestly, we both know enough to do her job better than she had done thus far.

Another thing we did was instruct the lender to remove all broker fees, and make sure there is no rebate in the lock on our rate AND remove the processing fee. Essentially, we zeroed out everything the broker would have received, cutting them out of the picture completely, making the deal a complete loss for them. They deserved it in my opinion.

Why did we do this? Two words my friends, fiduciary duty. Those two little words are quite powerful when the broker knows, by virtue of having our application, that if this deal does not close by a certain date we will be have to pay the seller money. This becomes even more worrisome for the broker when we have proof of their lack of attention to our deal. We save our fax receipts.

Of course, the broker was quite upset about this and I received a call from the license holder himself asking what in the world we were doing. We explained to him that we have canceled all their fees and charges on this deal. Due to their negligence, I demanded that they also wire money into my bank account to cover the over-time clause in the purchase agreement since we went over by 2 days, of course, due to their neglect.

He didn't respond to that very well, so I thought I would offer a little encouragement. If he didn't comply, I would be forced to report him to the Department of Real Estate (DRE) and I will make every possible attempt to have his licensed revoked. I stated the laws and covenants that his brokerage company had broken and how his license is at risk of being revoked.

I had my money the next day, and this was the last time we spoke. Good riddance to bad brokers. Kings Way Financial, stay away from them.

The lender by now had processed the docs and sent them to escrow. We grabbed our best signing pens and went to the escrow office to sign our docs. The rest, as they say, is history.

Happy Home Owners

This is what happened to us as first time home buyers. The broker, while probably very capable to do business, failed to meet their State mandated obligations to us as their consumer. If we had not done what we did, then we most likely would not have the home we are in right now, and it was a sweet deal too.

There are too many people out there that are terribly reliant on others to get stuff done for them. In this case, if we had not been as knowledgeable as we were in the mortgage industry, we would have lost the house we are in now.

Thankfully we both have a good nose for bullshit too.

The end result of this was that we only forked over about $2000 of our own money. We did an 80/20 loan (100% financing) and even had the broker pay us to keep quiet about his company's own negligence.

Recent Events

I'm not surprised by what has happened to the mortgage industry these past months. In fact, it's about time if you ask me. These mortgage companies knew everything that was going on, but they hide behind their closed doors and endless paperwork and workflow.

I'm glad to see them falling apart. I'm not glad to see so many people out of work due to the mess that was created, but I believe it needs to happen.

We no longer work in the mortgage industry, nor will we ever again.

You might also enjoy these related posts

1. StumbleUpon 10,000 New Visitors To Your Blog One of the best things about being a relatively new blogger is all the discovery you have waiting for you. I still enjoy learning new things quite a bit and...
2. Entrecard 10,000 Credit Giveaway Results I’m excited to announce that I have picked a winner for the Entrecard 10,000 EC Credit Giveaway. The Winner Is! MyKitty of HelloKittyGifts.com! Congratulations MyKitty, I hope the 10,000 EC...
3. Pre-Order Airline Tickets for an Unknown Date Here’s a completely random idea for the airline industry.  Many times people don’t know when they are going to fly, but they know they will need to fly sometime in...
4. The Entrecard 10,000 EC Credit Giveaway Contest The contest is now closed. Thank you to everyone that participated! That's right! I'm giving away 10,000 Entrecard credits to one lucky person. Imagine what you could do with...
5. The World is Crazy, Here’s Proof Just when you thought it was safe to wake up, have some breakfast and catch the news… The headlines in today’s paper are not only showing how people are trying...