Once I am done with this post I'll be caught up with writing about the start of the process of buying our Ryan home and will begin to write about things as they happen. I want you to know that all the posts up to this point actually happened in a short period of a few weeks despite the dates on the post.
The pre-construction meeting was the first time that my wife and I met the construction manager for our home. Our rep that has been dealing with us so far was also there. Most of the meeting with the construction manager was about what he does, so I thought I would start there. He is in charge of lining up and scheduling all the contractors that will build our house. Ryan homes hires local contractors to do all the work on building the homes. He is in the home about once every day to see how things are going and to make sure the work is being done. He is also our point of contact if we have any construction questions, like when should I have the home inspector go out there for a pre-backfill inspection. The sales rep is also still there if we have any questions as well.
One thing that became clear at this meeting (that I think I was misled about earlier) is how difficult it is to walk through your house to take a look at it prior to settlement. As I mentioned in an earlier post I asked the sales rep if I can walk through the house to make sure things were being done right on a regular basis (I think I even told her once a week). She said that was doable and to just call the construction manager before hand so he can tell me if there is any dangers on the site. I found out at this meeting that if I wanted to walk through the house the construction manager needs to be there. I can call and make an appointment, as long as he has time available, but he indicated he is typically very busy. The outcome of this is that I don't think I will be able to see the house except at the predefined walk through. I am kind of disappointed in being misled like this; however, thinking about it afterwards I realized that I wouldn't even know what to look for if I was to walk through the house to make sure things looked fine. As a result I am a little less upset about it now because I don't think I would benefit from walking through the house once or twice a week, but I was still misled so I plan to that down on the post-settlement survey. But this leads to another very important topic, hiring a home inspector. As I mentioned before the construction manager works for Ryan homes and he has dead lines to meet so he receives raises/bonus. He is over seeing people that were the lowest bidder to build your house, and he is also over seeing maybe a dozen other houses at the same time. Don't rely on him to spot mistakes, or even to fix them if he does spot them, the one person he does not work for or have loyalty to is you. As I just mentioned I have no experience with building a house so I found a home inspector to by on my side to make sure things look right. I asked around and found a home inspector that my coworkers raved about. This home inspector will do a pre-backfill, pre-drywall, and pre-settlement inspection for me. I think it is very important to have someone on my side to make sure the house is as it is supposed to be.
I asked the construction manager how scheduling my home inspector works. I sounds like I just need to let him know what day and time my home inspector will be out there. I am also allowed to come with the inspector if I can get off work. One thing to note is they won't pause construction for any inspections. My inspector told me that I need to be very active on keeping track of the construction schedule and to schedule something about a week out which is his normal availability. I am already emailing my construction manager about pre-backfill so I know when to have the home inspector come out.
At the pre-construction meeting we also went over the final selection of upgrades and selections. We also saw an updated plat with our house on it. Everything looked as expected. Needles to say my wife and I are getting excitied.
Monday, February 27, 2012
Monday, February 20, 2012
Meeting with the flooring people
You need to meet with two companies in the first 30 days (besides your mortgage people). The first was guardian for you low voltage wiring which I talked about in my last post. The second (you can meet with them in any order) is the flooring people to choose carpet, tiles, wood flooring and anything else.
The company that was doing our flooring is Stonemark Flooring, and I have to say that the whole process of dealing with them has been horrible. When at their show room it was like pulling teeth to get the price for particular upgrades. I asked if I could just see the list in writing and our associate, Rebecca, would say I don't really have an official list that she could print off, they were all on the computer. SO I kept asking for various upgrades and she would sigh every time before telling me the price for the upgrade. Then finding out what selections were part of that upgrade was also difficult. For example upgrade 6 was below upgrade 1 on the shelf, and when I would ask where upgrade 1 was she would waive vaguely at the shelf making it difficult to know where one upgrade started and one ended. They also lacked knowledge about their product. I would ask what the carpet density or number of twists were for a sample and she would say it was on the back but out of all the samples I picked up only one had it on the back. When I continued to ask she told me that the manufacture didn't tell them what it was. If you have ever bought carpet you will know that these two qualities of a carpet is what tells you the quality of the carpet and all carpets have them listed. I ended up having to compare the wieght of carpets and try to count the twists myself. Stonemake flooring was useless when it came to providing product information.
Either they were very bad at their job, didn't care because they knew I had to do business with them, or are trying to deceive me by providing a lower grade carpet. I feel completely cheated by the process of dealing with them that I plan to ask my Ryan Rep for the are manager so I can tell them my experience and how I felt that they are trying to deceive me. I'll let you know how it goes.
I know I have gone on and on about certain upgrades being very over priced, but it seems to be very true for the carpet too. For example they were charging what came out to be $8.00 per square yard for the upgraded pad. $23 per square yard for a middle of the line carpet. It seems that you will do better off if you can upgrade your carpet after you settle if you don't need to roll it in to the mortgage. Pluss you can select from more brands. Just so you know the base line carpet is of the same level an apartment would have.
One last thing, they did this demonstration on the stain resistance of the carpet. They put two carpet samples in a container of cool-aid. When they pulled it out they showed how the carpet without stain guard didn't get dyed. The problem is they waited until my back was turned to set the demonstration up. I would have wanted to see what the carpet looked like before they put it in the cool-aid. Maybe others can comment on if they saw the demonstration set up or did they wait until your back was turned? I have read that stain guard carpet is well worth the money, but as a scientist not seeing the carpet before the cool-aid made the demonstration useless to me.
The company that was doing our flooring is Stonemark Flooring, and I have to say that the whole process of dealing with them has been horrible. When at their show room it was like pulling teeth to get the price for particular upgrades. I asked if I could just see the list in writing and our associate, Rebecca, would say I don't really have an official list that she could print off, they were all on the computer. SO I kept asking for various upgrades and she would sigh every time before telling me the price for the upgrade. Then finding out what selections were part of that upgrade was also difficult. For example upgrade 6 was below upgrade 1 on the shelf, and when I would ask where upgrade 1 was she would waive vaguely at the shelf making it difficult to know where one upgrade started and one ended. They also lacked knowledge about their product. I would ask what the carpet density or number of twists were for a sample and she would say it was on the back but out of all the samples I picked up only one had it on the back. When I continued to ask she told me that the manufacture didn't tell them what it was. If you have ever bought carpet you will know that these two qualities of a carpet is what tells you the quality of the carpet and all carpets have them listed. I ended up having to compare the wieght of carpets and try to count the twists myself. Stonemake flooring was useless when it came to providing product information.
Either they were very bad at their job, didn't care because they knew I had to do business with them, or are trying to deceive me by providing a lower grade carpet. I feel completely cheated by the process of dealing with them that I plan to ask my Ryan Rep for the are manager so I can tell them my experience and how I felt that they are trying to deceive me. I'll let you know how it goes.
I know I have gone on and on about certain upgrades being very over priced, but it seems to be very true for the carpet too. For example they were charging what came out to be $8.00 per square yard for the upgraded pad. $23 per square yard for a middle of the line carpet. It seems that you will do better off if you can upgrade your carpet after you settle if you don't need to roll it in to the mortgage. Pluss you can select from more brands. Just so you know the base line carpet is of the same level an apartment would have.
One last thing, they did this demonstration on the stain resistance of the carpet. They put two carpet samples in a container of cool-aid. When they pulled it out they showed how the carpet without stain guard didn't get dyed. The problem is they waited until my back was turned to set the demonstration up. I would have wanted to see what the carpet looked like before they put it in the cool-aid. Maybe others can comment on if they saw the demonstration set up or did they wait until your back was turned? I have read that stain guard carpet is well worth the money, but as a scientist not seeing the carpet before the cool-aid made the demonstration useless to me.
Meeting with Guardian people
I met with the Guardian people the other day (I am still trying to catch up on blogging about the whole experience, so it was really over a week ago). Guardian s the company that will install the low voltage wiring in the walls of your house. For those of you who don't know, low voltage wiring is all the wiring for phone, internet, cable tc, in-wall speakers, alarm systems, in-wall video cables. They also offer a central vacuum setup.
The home comes with two phone jacks, and two cable jacks. The phone jacks have to be in the kitchen and master bedroom. The cable jacks have to be in the family room and master bedroom. If you want them elsewhere you should ask, but there is no guarantee that they will do it. You should know that they use Cat5 cable for the phone lines too, and the jacks they use accept both phone and Ethernet plugs, so if you don't plan on having a home phone system these can still be used for internet. They were charging me $95 per additional phone, Ethernet or phone line that they put in. This is something you can do your self after you move in but it involves cutting drywall and patching it up. If you plan on painting the place this isn't so bad since you will paint the patches. Even if you don't plan on painting you can paint the patches you make with the same color paint they have. It is difficult to run a line between floors, so I asked them to run a cable line and two cat5 lines (one can be used for phone) up to the attic. This way I can split the cables from there and easily run them in to each bedroom, I think this was worth the $285.
They also hang a tv up for you and run lines behind the wall to the cable box\blu ray player. The price for this seemed a bit high, and if you have a little DIY skills you can also do this yourself with little trouble. What I didn't like about this service is they run a specific number of cables, I believe it was one HDMI and one set of component cables. If you have more than two devices, or need two HDMI cables you will be out of luck, so think ahead.
They also offer features such as whole house audio, setting up in wall speakers. Agian, these are things you could do later (and better) if you have the know how for less. The research I did showed that these things add very little value to your house, so you won't make the money back when you sell the house; however, if it is something you want and don't know how to do it your self it may be worth having guardian do it.
Guardians big thing is the alarm system. They want to put a wired alarm system in to your house for little cost and then have you committed to paying for their alarm service for 3 years. This is what they will spend the most time selling you on. My wife and I wanted an alarm system so we looked at what we got for free plus what we would want to add on. We only got one control panel, sensors on the doors to the house, and a motion detector for free. To get sensors on the first floor windows, another control panel and a smoke detector would have been many hundreds of dollars. As a comparison we could get a wireless system with ATK for $100 installed that had everything we wanted (ATKs package came with more free stuff if you sign a 3 year contract). The monthly cost was $2 cheaper per month with ATK. ATK also had the ability to monitor your home from your cell phone, a feature Guardian's wired package currently does not (but it is in the works). The guardian rep tried to sell me on the idea of a wired system. It has a couple of advantages, you don't have to replace batteries (ATK does monitor the batteries in all your devices and will call you when one gets low so you know to replace it), and the door sensors can be hidden (the window sensors are not hidden). The wired package also has some disadvantages, it takes a lot of effort to add on to the system. If you want to add another window sensor, or glass breaking sensor you can't without having to run wire through your walls. With a wireless system you just put a battery in and put it where you want. In the end I decided to not go with guardian for the wired alarm system, although I will consider them and ATK (plus others) for their wireless system. The guardian guy pushed the alarm system using quite a few scare tactics. When I continued to say no he offered me three months free OR a free smoke detector. When I continued to say no it turned in to three months free AND a smoke detector. This was tempting but just wasn't enough to get me, but if you are going to use them for your alarm company try saying you aren't interested, you may get similar offers to mine.
In the end I didn't get much from guardian except a few cable runs because I plan on doing most of the stuff myself for less money and a better system. It actually isn't about the money for me on this topic, I really enjoy setting these types of things up myself and doing it the way I want it done. That might not be for everyone though. Overall, the Guardian rep was nice, only a little pushy on the alarm system (but not overly pushy) and was knowledgeable about what he was talking about.
The home comes with two phone jacks, and two cable jacks. The phone jacks have to be in the kitchen and master bedroom. The cable jacks have to be in the family room and master bedroom. If you want them elsewhere you should ask, but there is no guarantee that they will do it. You should know that they use Cat5 cable for the phone lines too, and the jacks they use accept both phone and Ethernet plugs, so if you don't plan on having a home phone system these can still be used for internet. They were charging me $95 per additional phone, Ethernet or phone line that they put in. This is something you can do your self after you move in but it involves cutting drywall and patching it up. If you plan on painting the place this isn't so bad since you will paint the patches. Even if you don't plan on painting you can paint the patches you make with the same color paint they have. It is difficult to run a line between floors, so I asked them to run a cable line and two cat5 lines (one can be used for phone) up to the attic. This way I can split the cables from there and easily run them in to each bedroom, I think this was worth the $285.
They also hang a tv up for you and run lines behind the wall to the cable box\blu ray player. The price for this seemed a bit high, and if you have a little DIY skills you can also do this yourself with little trouble. What I didn't like about this service is they run a specific number of cables, I believe it was one HDMI and one set of component cables. If you have more than two devices, or need two HDMI cables you will be out of luck, so think ahead.
They also offer features such as whole house audio, setting up in wall speakers. Agian, these are things you could do later (and better) if you have the know how for less. The research I did showed that these things add very little value to your house, so you won't make the money back when you sell the house; however, if it is something you want and don't know how to do it your self it may be worth having guardian do it.
Guardians big thing is the alarm system. They want to put a wired alarm system in to your house for little cost and then have you committed to paying for their alarm service for 3 years. This is what they will spend the most time selling you on. My wife and I wanted an alarm system so we looked at what we got for free plus what we would want to add on. We only got one control panel, sensors on the doors to the house, and a motion detector for free. To get sensors on the first floor windows, another control panel and a smoke detector would have been many hundreds of dollars. As a comparison we could get a wireless system with ATK for $100 installed that had everything we wanted (ATKs package came with more free stuff if you sign a 3 year contract). The monthly cost was $2 cheaper per month with ATK. ATK also had the ability to monitor your home from your cell phone, a feature Guardian's wired package currently does not (but it is in the works). The guardian rep tried to sell me on the idea of a wired system. It has a couple of advantages, you don't have to replace batteries (ATK does monitor the batteries in all your devices and will call you when one gets low so you know to replace it), and the door sensors can be hidden (the window sensors are not hidden). The wired package also has some disadvantages, it takes a lot of effort to add on to the system. If you want to add another window sensor, or glass breaking sensor you can't without having to run wire through your walls. With a wireless system you just put a battery in and put it where you want. In the end I decided to not go with guardian for the wired alarm system, although I will consider them and ATK (plus others) for their wireless system. The guardian guy pushed the alarm system using quite a few scare tactics. When I continued to say no he offered me three months free OR a free smoke detector. When I continued to say no it turned in to three months free AND a smoke detector. This was tempting but just wasn't enough to get me, but if you are going to use them for your alarm company try saying you aren't interested, you may get similar offers to mine.
In the end I didn't get much from guardian except a few cable runs because I plan on doing most of the stuff myself for less money and a better system. It actually isn't about the money for me on this topic, I really enjoy setting these types of things up myself and doing it the way I want it done. That might not be for everyone though. Overall, the Guardian rep was nice, only a little pushy on the alarm system (but not overly pushy) and was knowledgeable about what he was talking about.
Monday, February 13, 2012
Over priced upgrades
As I mentioned before after you sign your contract you have two weeks to make changes. During this time I did research on a few of the upgrades and I found some really surprising results. As the title of this post suggests I discovered that the upgrades offered by Ryan Homes are well over priced.
The most blatant of over priced upgrades (that I discovered) was the appliances. My wife and I had opted for the second highest level. This upgrade was $3,300 for a GE profile oven, dishwasher and above the stove microwave. When I looked up the price on Lowe's and Sears I could buy all three for $2,900. That is a savings of $400, plus if I sell the very basic stove, oven and above the stove exhaust fan for 50% on Craig's list I could get $600, that'll bring my savings to $1000 easy!! Plus I can get any brand. Needless to say we changed our upgrade to the basic package. My wife and I also plan to hit the Memorial day sale and save even more.
The kitchen knobs are a similar story. They charge $200 for knobs on the kitchen and bathroom cabinets. The knobs they use are simple chrome knobs. I never counted the number of knobs but I would guess 40 in the entire house. At $3 a piece (price at home depot) that would cost $120. Knobs are super easy to install your grandmother can do it, all you need is a drill. Plus, you can add style to your kitchen by choosing from hundreads of knobs at home depot instead of being forced to have the same knobs as all your neighbors. You can also get light fixtures and faucet upgrades for cheaper than the upgrade (plus sell whatever they give you on Criag's list to make even more money).
The bigger ticket items such as granite counter tops also can be done cheaper than the upgrade itself. The granite upgrade in our model (the Rome) is about $4,500. I got an estimate from Home Depot for the same granite for $3,200 installed plus $900 to remove the old counter tops. In total I could save $400. What is amazing here is Ryan homes already has to install the counter tops PLUS they don't have to remove old counter tops PLUS you already paid for basic counter tops in the price of the house, so you can just see the profit Ryan is making off their customers upgrades. Ridiculous huh!
You might be asking how can Ryan Homes charge such crazy prices for their upgrades. They are relying on two things. First they are hoping that their customers don't realize, either by ignorance or since Ryan prices their upgrades as one price, instead of the more familiar individual price or price per square foot you would see at a store. Secondly and most importantly they hope that their customers need to roll the cost in to their mortgage. The only way you can put the cost of the stove in to your mortgage is to buy it through Ryan Homes. If you don't have a down payment that can cover doing these items on your own, then if you want them you have to pay the extra price.
If you already bought the upgrades you shouldn't worry too much, you probably added as much value to your home as you paid in the upgrade. When you upgrade parts of the house it sells for more than the upgrade cost. People who buy fixer upers, fix everything, and then sell make money because it cost less to upgrade most things than it adds to the home value. The same applies for new homes too except Ryan is making the profit instead of you, you most likely broke even. But there is a few grand out there that you can save if you play it smart. Finishing your basement (if it wasn't your incentive like it was ours) is also a good way to make save money.
Also, as far as I can tell it would be hard to upgrade the carpet after the house is built for less than the upgrade, but it is very close (Ryan I am sure is still making money on the upgrade because they don't have to pay to tear out old carpet). It'll depend on the quality of the upgraded carpet which I haven't seen. We have our flooring meeting on Friday, so I'll let you know after that.
Lastly, I will say even with some price gouging for the upgrades Ryan Homes still seems priced well. I am talking about a few thousand in savings at most by doing the upgrades after the house is built.
The most blatant of over priced upgrades (that I discovered) was the appliances. My wife and I had opted for the second highest level. This upgrade was $3,300 for a GE profile oven, dishwasher and above the stove microwave. When I looked up the price on Lowe's and Sears I could buy all three for $2,900. That is a savings of $400, plus if I sell the very basic stove, oven and above the stove exhaust fan for 50% on Craig's list I could get $600, that'll bring my savings to $1000 easy!! Plus I can get any brand. Needless to say we changed our upgrade to the basic package. My wife and I also plan to hit the Memorial day sale and save even more.
The kitchen knobs are a similar story. They charge $200 for knobs on the kitchen and bathroom cabinets. The knobs they use are simple chrome knobs. I never counted the number of knobs but I would guess 40 in the entire house. At $3 a piece (price at home depot) that would cost $120. Knobs are super easy to install your grandmother can do it, all you need is a drill. Plus, you can add style to your kitchen by choosing from hundreads of knobs at home depot instead of being forced to have the same knobs as all your neighbors. You can also get light fixtures and faucet upgrades for cheaper than the upgrade (plus sell whatever they give you on Criag's list to make even more money).
The bigger ticket items such as granite counter tops also can be done cheaper than the upgrade itself. The granite upgrade in our model (the Rome) is about $4,500. I got an estimate from Home Depot for the same granite for $3,200 installed plus $900 to remove the old counter tops. In total I could save $400. What is amazing here is Ryan homes already has to install the counter tops PLUS they don't have to remove old counter tops PLUS you already paid for basic counter tops in the price of the house, so you can just see the profit Ryan is making off their customers upgrades. Ridiculous huh!
You might be asking how can Ryan Homes charge such crazy prices for their upgrades. They are relying on two things. First they are hoping that their customers don't realize, either by ignorance or since Ryan prices their upgrades as one price, instead of the more familiar individual price or price per square foot you would see at a store. Secondly and most importantly they hope that their customers need to roll the cost in to their mortgage. The only way you can put the cost of the stove in to your mortgage is to buy it through Ryan Homes. If you don't have a down payment that can cover doing these items on your own, then if you want them you have to pay the extra price.
If you already bought the upgrades you shouldn't worry too much, you probably added as much value to your home as you paid in the upgrade. When you upgrade parts of the house it sells for more than the upgrade cost. People who buy fixer upers, fix everything, and then sell make money because it cost less to upgrade most things than it adds to the home value. The same applies for new homes too except Ryan is making the profit instead of you, you most likely broke even. But there is a few grand out there that you can save if you play it smart. Finishing your basement (if it wasn't your incentive like it was ours) is also a good way to make save money.
Also, as far as I can tell it would be hard to upgrade the carpet after the house is built for less than the upgrade, but it is very close (Ryan I am sure is still making money on the upgrade because they don't have to pay to tear out old carpet). It'll depend on the quality of the upgraded carpet which I haven't seen. We have our flooring meeting on Friday, so I'll let you know after that.
Lastly, I will say even with some price gouging for the upgrades Ryan Homes still seems priced well. I am talking about a few thousand in savings at most by doing the upgrades after the house is built.
Monday, February 6, 2012
The Mortgage
After you sign the contract you have seven days to meet with the mortgage company. The place I went to they didn't have weekend or evening office hours, so be prepared to take a few hours off from work for this, but I am getting ahead of my self, let's talk about mortgages in general.
Most people buying a home don't have the money to pay cash, so they take a loan or a mortgage. A bank or someone else gives you money, and in return you pay it back, a little every month. You also have to pay them interest, think of it as you buying the loan of money, every month you'll be paying interest/buying the loan by paying more than what you borrowed. The longer they loan you money for, the more it cost to buy the loan. A standard mortgage is for 30 years which is a long time, but you can also do 20, 15 or even shorter loans. In addition to paying interest there are many other fees that are required to buy the loan. There will be an origination fee which is expressed in points or a percentage of the mortgage (1 point is 1 percent of the money that they loan you). You will pay the origination fee when you take control of the house (that is also the time the money is officially lent to you and you start paying interest). There will also be a lot of flat fees such as appraisals, application fees, credit report fees and the like. You'll also pay this at closing. To save the most money (now and over the next 30 or so years) you will want to minimize these fees which is why you want to shop around. It's a really good idea to shop around, all lenders will give you a good faith estimate of all the fees.
Ryan homes wants you to go with their lender, NVR mortgage. Just so you know NV Inc owns both Ryan Homes and NVR Mortgage (they also own other companies like NV Homes), that is why they want you to use NVR mortgage. They offered us a free finished basement (actually only part of it was free, since we added the morning room on we had to pay for the extra part of the basement to be finished). This does not mean that you should just bend over and go with NVR mortgage but first I want to discuss what is legal and not legal (and barly legal) in terms of packaging a new construction home with a mortgage.
In Maryland (and other states) there is a law that says a builder can offer incentives to a buyer to use a certain mortgage company; however, they have to offer you a mortgage comparable to what you can get shopping around. This means that they cannot put fees in or higher interests rates to negate your incentive. If your state doesn't have these laws there are also federal anti-trust laws that could be used to stop the mortgage company of adding unreasonable fees/interests rates to make back the incentive; however, after I looked at these laws I feel that it doesn't really stop it. Lucky for me I am in Maryland so I am protected, but that doesn't mean I should let my guard down. I got a couple good faith estimates from the two banks I do business with along with some research online (you can get a loan from an online company as well). I came armed with this knowledge when I showed up at my NVR mortgage appointment.
The first thing they will do is take all of your financial documentation that you brought, the Ryan rep will give you a long list when you sign the contract. This will include the last two months of statements for your bank accounts, investment accounts, pay stubs and two years of your federal taxes. They will also want statements of your loan payments (including any loans you cosigned on, such as that student loan your parents are still paying off). You will need to provide your spouses as well. The reason they want your bank statements is they want to see if you got any large payments recently (besides your job). This is because when considering your down payment in figuring your interest rate it matters weather you saved it up or your parents gave it to you. The reason is if you saved it you must be more responsible. If your parents plan on giving you money, you may want to consider getting it in your bank account a few months ahead of time. Everything else they want is just to verify your financial situation, what you make and what you owe.
I brought all of the info they needed, but I forgot one month bank statement for an account. No worries though we were able to finish everything and I mailed it to them the next day. After going through all the paperwork I brought they gave me a good faith estimate. I was expecting some large fee that they were going to try to swindle me with to make up for the incentive they offered me. To my delight there estimate was between the two estimates I had already gotten. All of them had the same interest rate and were pretty close in fees. After looking it over and finding it acceptable I signed that I wanted to proceed with the loan approval and then she came back with a ton of papers to sign. There were papers for this and that. As I mentioned before I read stuff before I sign. She was patient with me while I skimmed through everything. There was nothing complicated or a surprise and she explained any questions I had. I went by myself, which was fine. After signing all the paperwork she made copies and I brought them home for my wife to sign. She also provided me a UPS envelope prepaid so I could overnight it back to her.
Just because my NVR mortgage was similar to the banks doesn't mean it will be for you. If you are borderline between interest rates you may save big by using a lower mortgage rate at a bank than NVR mortgage. Google amortization calculator and you'll be able to figure out what your monthly payment will be and how much interest you will pay back for different loan amounts and interest rates. That $10,000 incentive might look like pennies when you see how a slight change in interest rate changes how much money you pay over 30 years. Plus that $10,000 finished basement (or other incentive) isn't really $10,000 since you could have a contractor come and and do it for $7,000 after you buy the house, but I will talk about that in a post coming up real soon. So GET MULTIPLE GOOD FAITH ESTIMATES!!!
Overall I felt that NVR mortgage was no different that the two banks I also went to. They didn't have the lowest offer, but it was definitely comparable, and with the incentive of the finished basement it was worth it. The customer service was good, but so were the banks. They did have free coffee and a good coffee station with milk and Splenda that I took advantage of, but I deserved that because it took almost three hours to go through everything (45 minutes of that was probably me reading/skimming everything, but you'll do that too). Overall the experience was average compared to the banks except I got coffee.
On a second to last note, NVR mortgage most likely will sell your mortgage to a different company the second you close on your home. In fact it is so likely that they have you sign a paper that tells you that they don't hold mortgages long term and intend to sell it. This practice is very common; although, I don't completely agree with it (but that is something for congress to fix). So don't be surprised if it ends up at a big bank or even with someone you never heard of. Your terms won't change, just who you make the check out to. The reason I don't like this practice is that I feel part of shopping around for a mortgage should involve shopping around for a company that you are willing to do business with. For example I would never do business with Chase banks (they stole my mom's money after she passed away by assessing fees to her account, I felt this was immoral); however, Chase may end up with my mortgage and I'll be forced to deal with them. That is just the way of mortgages.
On a last note there are many complexities to mortgages; however, they are easy to understand. I may write a blog in the future about it but you should understand your mortgage before you get one. Google how mortgages work or ask your parents or a friend that has a good financial head. Consumers not understanding how a mortgage works is part of the reason we had a financial collapse, the others being that banks let people take loans they knew they didn't understand and had little chance of being able to pay off. Also if you are confused ask the banker or person doing your loan. If they can't explian any part of it to you then don't sign. Understanding your mortgage s your responsibility. There are also many types of loans, from fixed to adjustable to ones with balloon payments. From what I can tell NVR only offered fixed loans which with the low interest rates we have now is the best loan for everyone. I didn't ask the rep if they offered other types of loans so I would like to hear from other people, were you offered anything except a fixed rate loan from NVR mortgage?
Most people buying a home don't have the money to pay cash, so they take a loan or a mortgage. A bank or someone else gives you money, and in return you pay it back, a little every month. You also have to pay them interest, think of it as you buying the loan of money, every month you'll be paying interest/buying the loan by paying more than what you borrowed. The longer they loan you money for, the more it cost to buy the loan. A standard mortgage is for 30 years which is a long time, but you can also do 20, 15 or even shorter loans. In addition to paying interest there are many other fees that are required to buy the loan. There will be an origination fee which is expressed in points or a percentage of the mortgage (1 point is 1 percent of the money that they loan you). You will pay the origination fee when you take control of the house (that is also the time the money is officially lent to you and you start paying interest). There will also be a lot of flat fees such as appraisals, application fees, credit report fees and the like. You'll also pay this at closing. To save the most money (now and over the next 30 or so years) you will want to minimize these fees which is why you want to shop around. It's a really good idea to shop around, all lenders will give you a good faith estimate of all the fees.
Ryan homes wants you to go with their lender, NVR mortgage. Just so you know NV Inc owns both Ryan Homes and NVR Mortgage (they also own other companies like NV Homes), that is why they want you to use NVR mortgage. They offered us a free finished basement (actually only part of it was free, since we added the morning room on we had to pay for the extra part of the basement to be finished). This does not mean that you should just bend over and go with NVR mortgage but first I want to discuss what is legal and not legal (and barly legal) in terms of packaging a new construction home with a mortgage.
In Maryland (and other states) there is a law that says a builder can offer incentives to a buyer to use a certain mortgage company; however, they have to offer you a mortgage comparable to what you can get shopping around. This means that they cannot put fees in or higher interests rates to negate your incentive. If your state doesn't have these laws there are also federal anti-trust laws that could be used to stop the mortgage company of adding unreasonable fees/interests rates to make back the incentive; however, after I looked at these laws I feel that it doesn't really stop it. Lucky for me I am in Maryland so I am protected, but that doesn't mean I should let my guard down. I got a couple good faith estimates from the two banks I do business with along with some research online (you can get a loan from an online company as well). I came armed with this knowledge when I showed up at my NVR mortgage appointment.
The first thing they will do is take all of your financial documentation that you brought, the Ryan rep will give you a long list when you sign the contract. This will include the last two months of statements for your bank accounts, investment accounts, pay stubs and two years of your federal taxes. They will also want statements of your loan payments (including any loans you cosigned on, such as that student loan your parents are still paying off). You will need to provide your spouses as well. The reason they want your bank statements is they want to see if you got any large payments recently (besides your job). This is because when considering your down payment in figuring your interest rate it matters weather you saved it up or your parents gave it to you. The reason is if you saved it you must be more responsible. If your parents plan on giving you money, you may want to consider getting it in your bank account a few months ahead of time. Everything else they want is just to verify your financial situation, what you make and what you owe.
I brought all of the info they needed, but I forgot one month bank statement for an account. No worries though we were able to finish everything and I mailed it to them the next day. After going through all the paperwork I brought they gave me a good faith estimate. I was expecting some large fee that they were going to try to swindle me with to make up for the incentive they offered me. To my delight there estimate was between the two estimates I had already gotten. All of them had the same interest rate and were pretty close in fees. After looking it over and finding it acceptable I signed that I wanted to proceed with the loan approval and then she came back with a ton of papers to sign. There were papers for this and that. As I mentioned before I read stuff before I sign. She was patient with me while I skimmed through everything. There was nothing complicated or a surprise and she explained any questions I had. I went by myself, which was fine. After signing all the paperwork she made copies and I brought them home for my wife to sign. She also provided me a UPS envelope prepaid so I could overnight it back to her.
Just because my NVR mortgage was similar to the banks doesn't mean it will be for you. If you are borderline between interest rates you may save big by using a lower mortgage rate at a bank than NVR mortgage. Google amortization calculator and you'll be able to figure out what your monthly payment will be and how much interest you will pay back for different loan amounts and interest rates. That $10,000 incentive might look like pennies when you see how a slight change in interest rate changes how much money you pay over 30 years. Plus that $10,000 finished basement (or other incentive) isn't really $10,000 since you could have a contractor come and and do it for $7,000 after you buy the house, but I will talk about that in a post coming up real soon. So GET MULTIPLE GOOD FAITH ESTIMATES!!!
Overall I felt that NVR mortgage was no different that the two banks I also went to. They didn't have the lowest offer, but it was definitely comparable, and with the incentive of the finished basement it was worth it. The customer service was good, but so were the banks. They did have free coffee and a good coffee station with milk and Splenda that I took advantage of, but I deserved that because it took almost three hours to go through everything (45 minutes of that was probably me reading/skimming everything, but you'll do that too). Overall the experience was average compared to the banks except I got coffee.
On a second to last note, NVR mortgage most likely will sell your mortgage to a different company the second you close on your home. In fact it is so likely that they have you sign a paper that tells you that they don't hold mortgages long term and intend to sell it. This practice is very common; although, I don't completely agree with it (but that is something for congress to fix). So don't be surprised if it ends up at a big bank or even with someone you never heard of. Your terms won't change, just who you make the check out to. The reason I don't like this practice is that I feel part of shopping around for a mortgage should involve shopping around for a company that you are willing to do business with. For example I would never do business with Chase banks (they stole my mom's money after she passed away by assessing fees to her account, I felt this was immoral); however, Chase may end up with my mortgage and I'll be forced to deal with them. That is just the way of mortgages.
On a last note there are many complexities to mortgages; however, they are easy to understand. I may write a blog in the future about it but you should understand your mortgage before you get one. Google how mortgages work or ask your parents or a friend that has a good financial head. Consumers not understanding how a mortgage works is part of the reason we had a financial collapse, the others being that banks let people take loans they knew they didn't understand and had little chance of being able to pay off. Also if you are confused ask the banker or person doing your loan. If they can't explian any part of it to you then don't sign. Understanding your mortgage s your responsibility. There are also many types of loans, from fixed to adjustable to ones with balloon payments. From what I can tell NVR only offered fixed loans which with the low interest rates we have now is the best loan for everyone. I didn't ask the rep if they offered other types of loans so I would like to hear from other people, were you offered anything except a fixed rate loan from NVR mortgage?
Thursday, February 2, 2012
The contract
After you decide on the house you want then you sign the contract. This was about a three hour process for us and Ryan's rep told us that that is typical. I recommend you make an appointment. Prior to this meeting I asked for a copy of the contract that they wanted me to sign and they did just that without any hassle. I read the entire contract so that I knew what was in it and what I was signing, and I highly recommend you do the same thing. They'll give you a one line summery for each section of what you sign, but I felt that she often didn't paint the whole picture for that section and glazed over the parts that are weighted in their favor. For example, they can delay your construction for basically any reason and you just have to deal; however, if you are out of town or in the hospital on the day they want to close they could charge you hefty fines.
The contract also lays out the building standards that they use which is the standards a national organization sets. I found this reassuring to know they don't decide what is quality work and what isn't. The contract also says you can't go on to the property during construction to check things out without prior approval. I told our rep it was my intention to stop by every day or two to check it out and walk around. She told me that wasn't a problem and to just let the construction manager know ahead of time so he could warn me of any dangers. I am still worried about it though because how the contract is written they could deny me access every day. I'll definitely report on how that goes. They could also deny a home inspector access until the very end (you really want the inspector to come out a couple times, but more on that later), but again I was assured that they wouldn't. I'll just have to hold my breath and find out how that goes as well. of course I'll raise a ruckus if it doesn't work out; however, other people didn't seem to have any problems.
During the signing you also be initialing floor plans, choosing all your options and filling out a mortgage survey if you plan on using their mortgage provider. I'll talk in detail about the mortgage in a later post. You also will have time to change some of the options you choose with no penalty. Some things you will have up to two weeks, and others one month. They'll let you know when you are there. If you are buying the house with someone else, such as your spouse, they will need to be there as well. I will point out that we also had our one year old son with us. The rep let him play all over on the floor of her office while we signed papers and never once got annoyed when he was loud or smashed food in to the carpet (which we made sure was clean before leaving), so big props to her for the customer service!
Although the process was long, it was pretty painless, especially since I read the contract ahead of time which I recommend you to do. While you read the contract you have to remember that even though it is heavily waited in their side there isn't a thing you can do about it, it isn't like they are going to change it for you. It is just something you have to deal with if you want a newly built house, but by reading the contract you at least know how far backwards they can make you bend.
When we were all done they gave us a sold sticker to put on the board with all the lots so we could cover our lot up. My wife loved it!
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