my life

The financing of.

I've begun my house-hunting/financing homework and one of the first things I noticed was that housing in Colorado Springs is pricey. To acquire a place that is comparable to my current home, I'm looking at somewhere between $200 - $250K. Yowza.

The house notes for such a place are doable. What's troublesome is that pesky 20% downpayment. (Yes...I know there are different mortgage plans in place to allow me to purchase a home with no money down, but most of them include a little thing called "mortgage insurance," a somewhat significant fee attached to each payment you make on the house until you can prove you own 20% of it. This insurance is not only a huge chunk of cash, but it's wasted money, IMO. You can't even write it off your taxes, for the love of Pete.) I'm looking into ways to acquire a home that suits my desires and current standard of living without pouring money down the drain.

Probably the best suggestion I've gotten is to purchase a VA repo. VA provides their own mortgage insurance, and even provides a reasonable interest rate--with no money down. The trick is winning the "sealed bid" process to get such a home. And homes are sold "as is," so there's always the possibility that whoever lost the home took out some angst on it before departing the premises, which means I may be doing some "fixing upping." This doesn't bother me, though. I'll have time, energy and interest.

I called my parents last night to discuss this. I wanted to ask if they had any spare cash laying around they could loan to me at a better interest rate than they could invest it, and I could save beaucoup cash by avoiding being ripped off by a bank. However, they--like me--have wisely invested their spare cash. My mother suggested I consider taking out an equity loan on my current house.

From what I understand, they appraise the home at its current worth, subtract what I owe, then loan me the balance (or less, of course). Until Mother mentioned it, I didn't really understand how this worked.

So...as fate would have it, my neighborhood is being improved at the moment. There's a tiny lot next to mine that has been surveyed and left with stakes and twine, and marked with those orange grass paintguns. This morning, Maxx alerted me to the fact that there were people out there, so I strolled out to take a look.

The contractor, as it turns out, is a man I met a couple of years ago at AUM. We took a class on the American Revolution together. We chatted for a while, catching up, and he told me what they plan to do with that lot next door. They're going to build two houses on it.

The lot in question, IMO, would comfortably hold only one house, but that's just the country, elbow-room in me asserting itself. I realize that most developers will squeeze as many houses as they can in per plot of land these days, and people seem content to buy those houses, too. So maybe I'm just a strange bear.

He said they're putting in a small house at the top of the hill that will be ~1000 square feet, and it will go for ~$140K. They'll put a larger, two-story ~2000 square foot house next to mine, and it'll go for around $180K.

I said, "You're kidding." He assured me he was on the level. I pointed out that the lot is tiny, and all going downhill toward my yard, no less, at something like a 7% grade. Apparently, this doesn't matter and won't hurt the price of the homes.

My mind is boggled, to say the least. My front yard alone is larger than the lot they're about to divide between two high-priced homes. Wetumpka has been developing noticably since I moved in three years ago. I paid $104k for this place in 2003. It's a 1955 brick home--very well built, with copper plumbing, no less--and just under 2000 square feet. I just had a new roof put on it, and we replaced the floor two years back. It's a well-made home. The only snag is the size of the vintage '50s bathrooms, but it makes up for their tininess with a huge kitchen.

As you might imagine, I've begun to wonder what this place appraises at now. Ronnie (the contractor) told me it probably goes for $70 or $80/square foot, because property values in this area have been steadily rising. That puts this home roughly in the $150,000 range, as a home. I would imagine that the size of the property could bump it up a bit, but maybe only if I sold it to a developer. Don't know, really.

At the very least, I might be able to get the 20% downpayment I need on equity alone. Of course...if I fail to rent this place as planned, I'll have an extra bill to deal with, too.

I'm also wondering if I could get a better rent price on the place if it's worth more. Je ne sais pas. Everything looks like a tradeoff to me--keep it and rent, or sell and abscond with the cash. Renting seems like the better return on the investment, but it also entails an extra headache, even if I hire an agency to handle it (which I plan to). I don't know.

What would you do?

d