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Woman on the Verge of a Mortgage Breakdown!

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Sarah Buys a House is a chronicle of Sarah DeGiorgis' journey along the road to becoming a property owner in West Philadelphia.

This is it. Next week (fingers crossed!), I’ll have my house keys and will officially be a homeowner. These past two weeks have been a whirlwind of last-minute things: finalizing the mortgage, getting insurance, starting to get quotes for the work that needs to be done after closing. I’m not gonna lie: It’s scary. But it’s also pretty amazing. For around $9,000 (that’s downpayment, deposits, closing costs, inspection, insurance, mortgage stuff), I bought a house! Of course, then I have my monthly payments and, you know, a mortgage. And that’s what I wanted to finally talk about: my mortgage.

First let me tell you a little bit about me and math: We don’t like each other. In second grade I talked (or not talked, as was the case with me) my way into the “slow” math group and spent lots of hours doodling and doing simple addition problems until my parents found out and made me switch to the accelerated group.

In the seventh grade I had a pretty bad flu and missed a whole week of school, and when I walked into math class the next week there was a quiz. I told my very nice teacher Mr. Frantz that I couldn’t do it because I had missed class all week and he looked at me and said, “Sarah, you’re smart and this stuff is easy. Just take the quiz. I’m sure you’ll do fine.” Defeated, I went back to my seat and looked at the first problem: I had no idea what it was even asking me to do. But Mr. Frantz was looking at me and nodding encouragingly as always so I gave it a try. I ended up doing something for each problem and making sure I wrote out all my steps so I could maybe get partial credit for starting out right even if I didn’t end up with the correct answer—I believe that is the patented English-major way of approaching math. A few days later we got the quizzes back and Mr. Frantz didn’t look at me as he set mine face-down on my desk. I turned it over: 0% in bright red. Ah ha! I thought. I am bad at math.

Since then I have not trusted myself around any sort of math and I use a calculator for the simplest things. So let’s just say that the mortgage was my least favorite part of this homebuying process. Now of course there are professionals who figure out your mortgage for you, but I wanted to make sure I knew exactly what I was paying for and why.

This is not necessary for normal, non-math averse people, but I ended up sitting down with my mortgage person for more than an hour (sorry!) and we went through every part of the mortgage. It’s a conventional loan, which I chose over FHA because FHA requires homes to be in a certain condition. I didn’t think this house would be in good enough condition and I wanted to make the repairs myself instead of leaving that to the seller (if they even would; they can also just refuse). One of the benefits of an FHA loan is that you only have to put 3.5% down, because it was made as a way for more people to be able to buy houses. But for the conventional loan I’d just need 5% down—I can afford that and it’ll make my total mortgage less so that seemed like the way to go. The mortgage is a 30-year fixed-rate, which means that the interest rate is locked in and can’t change. The interest rate is pretty low right now—mine is locked around 3.8%—and it’s likely to go up, not down, so locking it seemed like the smart choice.

So now I understood the loan. Next was what I was paying for with my monthly payment. It was all pretty straightforward except for one thing: mortgage insurance. I know it’s required with an FHA loan, but not with a conventional. I wasn’t sure why I needed it—I have really good credit because I am terrified of a bad credit score. I pay bills on time and I have one credit card that I use rarely and pay off as soon as I can. I paid off my student loans as soon as I could. So if I pay everything else on time why wouldn’t they trust me to pay my mortgage on time? Turns out that mortgage insurance is required on a conventional loan if you put down less than 20%. But if you put equity into the house—through renovations or the market improving—then you can renegotiate and get out of the mortgage insurance. So I’ll be doing that since my mortgage insurance adds about $65 to each monthly payment. Not a huge amount but it adds up and I’d rather not pay it. Plus $65 is a nice dinner out and that’s way more fun than mortgage insurance.

So after an hour with a person who is paid to do these things and a calculator, I felt comfortable paying this huge amount of money because I knew where it was going. It did take a little bit to swallow my pride and speak up when I didn’t understand where a number was coming from, but I was glad I did in the end. And so far no one has asked how a math idiot like me somehow saved enough money to buy a house! It’s crazy how much decorum these people have. Must be part of the job training.

· Sarah Buys a House Archives [CPHI]