Monday, September 17, 2007

Might As Well Get It Over With - Part 3

(Sorry for not getting this final part of my story up yesterday; we were tied up with a home improvement project that I'll post about in a few days.)

It took a lot of looking, but we finally found a nice two-story duplex to rent from a very nice couple who were willing to rent to us. We were totally upfront about our financial situation and they were kind enough to take a chance on us.

Shane, a friend, and our parents moved us in on July 4, 2003. I was in the hospital with Jean that day, the day Kat was born. We rented the place for almost three years. During that time, I totally revamped our budget and found budgeting software based on the old-fashioned "envelope system". I fully believe that if I'd had this system in place years ago, I could have easily avoided both bankruptcies. I'm just glad I found it when I did; our financial situation improved almost immediately.

We began repairing our credit little by little. We continued to use our one gas card and our warehouse club card, paying the balances in full each month. Working with our credit union, we paid one truck off a couple of months early. We took out a signature loan for some dental work for me and paid it off early. We took out a loan for our first minivan, then sold the paid-for truck, using that money to pay off our other truck loan, leaving us with just the van payment. We traded that van in for a new one, financing with the motor company for three months as a stipulation for a rebate, then refinancing with our credit union at a better interest rate. We also asked the credit union to set us up with a major credit card with a very low ($500) limit in order for us to rebuild more credit. Then, on a whim, we decided to find out if we could possibly qualify for another mortgage and found out that yes, there were some programs we could qualify for.

An FHA loan would work the best for us, we decided, so we started house-hunting. We found this house and made an offer, only to find out that because the foreclosure didn't happen at the time of the bankruptcy, we couldn't qualify for an FHA mortgage for another year. We were disappointed, but willing to stay in the duplex for another year. A few days later, the mortgage broker called and said that they'd found other financing for us. It ended up being an 80/20 mortgage, fixed interest for the first 24 months then adjustable. The interest rates weren't horrible, and the combined payment was within our range, so we agreed. I'm not sure yet if that was the best move we could have made, but it was the one we did make. I'll be able to tell you more when the loan becomes an adjustable rate mortgage and we try to May.

Incidentally, we later found out that four other closings depended on us buying this house, all in a chain-reaction fashion. Had that not been the case, I doubt the mortgage lender would have worked so hard to find us financing after we'd literally walked away from the deal.

Early this year, when Shane's truck was totaled in an accident, we found a fantastic deal on a truck to replace it, but even with the insurance check on the wrecked truck, we were a couple thousand dollars short. Again, we went to our credit union for a loan. We held onto the insurance check, and when our income tax return came a short while later, we were able to pay off the truck loan in full without ever having made a monthly payment. That certainly didn't hurt our relationship with the credit union.

The only negatives since our joint bankruptcy have been because we weren't prepared for an emergency situation. When Shane missed work this spring because of a dog bite to his arm and because of several rain days, we didn't have savings to fill in the gap. We had to dip into money earmarked for our property taxes and also put some things on our credit card, which now has a $2000 limit. We also have medical bills pending the outcome of a lawsuit against the dog owner (a post for another time); those may or may not have a negative impact on our credit.

So, we've been doing better, but we're still not comfortable with our finances, which is why I need to be generating some income. And why we'd really like to pay off all of our smaller debts, build up a nice savings toward emergencies, and then start paying down the mortgage.

Incidentally, the landlord who took a chance on us wrote, when he sent us back our rental deposit, that we were the best tenants he'd ever had. His taking a chance on us turned out well for all of us.

A year or so ago I drove by our house in the country and it was still empty, and listed for a price that, ironically, we could afford now. It's sad, because it was a very nice house, but homes deteriorate quickly when there is no one living in them; it was already beginning to show signs of disrepair.

As for our first house, the one we sold to our friends, it appraised recently for more than $100,000, with few changes from the way we left it. Had we stayed, we'd have plenty of equity in it, and could even have paid it off by now with a little discipline. Because it is our friends house and we have seen it often since we moved, we know we truly were becoming unhappy with it and would have moved anyway. But our friends seem very happy with it; I'm glad.

So that's our story. Some of you have been there, and unfortunately, others of you will be there, even if you think it's not possible. It could happen. Most people are just one accident, major illness or layoff away from serious financial trouble. My hope is that just one person or family can learn from our mistakes and not have to go through what we've been through.

If we had known better, we might not have had this much trouble. But we didn't know better. For that, we'll take responsibility, but refuse to carry any guilt or shame over it. We'll just make sure we're better educated from now on.


DadGuy said...

Thanks for sharing this story.

In a sense I have it good -- I've never been in that kind of financial trouble. But on the flipside, that kind of financial trouble (as you say) isn't that far from anyone given the circumstances they are handed.

It sounds like you are on the way up, but that doesn't make it any easier.

Annie Jones said...

Dadguy: Thanks for reading and commenting on it. I think some people think finances in general, and specifically financial trouble, are taboo subjects.

In the book "Your Money or Your Life" by Joe Dominguez and Vicki Robin, part of the plan is to make peace with your financial past with a "no shame, no blame" attitude. That's what I'm trying to do here.