Q–I plan to retire in December 1999. My wife is anxious for us to buy a retirement home now. We agree we want to sell our large house when I retire. She wants to move closer to our two children and three grandchildren. That’s fine with me. But I’m not sure we should buy a house, or a vacant lot to build a home on, now. What do you recommend?
A–My recommendation is don’t buy real estate you won’t use within six months after purchase. Too many things can happen to change your plans.
To use an extreme example, in 1972 Bernadine Suitum and her late husband bought an undeveloped lot near Lake Tahoe, where they planned someday to build their retirement home. When Bernadine applied for a building permit in 1987, she learned her lot had become unbuildable due to environmental restrictions. The U.S. Supreme Court recently said she can sue for damages. The case is Suitum v. Tahoe Regional Planning Agency, 117 S.Ct. 1659.
I often receive letters asking how to sell property that was purchased for retirement but is no longer needed. Usually one of the spouses has died or become ill. When you’re within six months of retirement, that’s the time to start shopping for a retirement residence.
Q–Thank you for recommending prospective home buyers get preapproved for a mortgage before looking at houses. We saw a mortgage broker’s newspaper ad and phoned. She said the first thing we should do is get preapproved for a mortgage. We filled out the paperwork and, within a few days, she got us preapproved for a mortgage with only a 3 percent down payment. Since we didn’t have the down payment, plus closing costs, my wife’s parents loaned us the money (that was OK with the lender). Last month we moved into our new home, which is ideal for our family, and we paid practically nothing down. Thanks for telling us to shop for a mortgage first.
A–I appreciate your “tale from the trenches,” because it will convince more home buyers than I can that the first home buying step is to get preapproved for a mortgage. After that, buying a home is easy.
Q–My husband and I want to buy a home. I phoned a mortgage broker who had helped a friend, but I didn’t like him. He wanted a $1,000 nonrefundable loan application fee. He said it applies to our loan costs. My husband refused to pay. Did we make a mistake?
A–No. A $1,000 nonrefundable loan application fee is outrageous. Some lenders charge a more reasonable refundable application fee of $200 or so, to weed out the unmotivated borrowers.
But any loan application fee paid should be refundable if the quoted loan cannot be obtained, regardless of whether the lender is a mortgage broker, bank, or S&L. I’m glad you didn’t pay that very high $1,000 loan application fee.
Q–We greatly appreciated your recent article about mortgage “subtle discrimination” and the illegal tactics some lenders use. As an African American, I especially appreciated your story about how you helped your Samoan tenant, Danny, get a mortgage by writing to the lender’s president.
A few months ago, my wife and I had a similar situation. We were rejected for a mortgage (due to a low appraisal) by the bank where my business has its accounts. I picked up the phone and called the bank’s president. But I got the runaround. I left messages with assistants to assistants. After three days of calling, I finally got through to the president’s secretary to tell her I wanted to speak with the president before filing a discrimination complaint with HUD. Within an hour, he phoned me, got all the information, and the next day our mortgage was approved. Persistence pays.
A–It’s very hard to prove illegal discrimination when a low appraisal justifies mortgage rejection. That is the unwritten favorite lender’s dirty trick to get out of making a mortgage loan.
Congratulations on persisting. As has been shown many times, when a mortgage is rejected without justification, it pays to go to the top as you did.
———-
Have a question about real estate? You can write to Robert Bruss in care of Tribune Real Estate Features Service, 435 N. Michigan Ave., Suite 1400, Chicago, Ill. 60611. Answers will be provided only through the column. Please note that laws vary from state to state and area to area. Consult an attorney for specific legal advice.
