« Affordable Homes Part 1

There's nothing like being on a "Mission" to get you all fired up! I've had so many comments on my "Yes, you CAN Buy an Affordable Home!" article from last month. Most of them very positive and encouraging. One from a person who completely missed the point, but that's covered in the Letters section with a reply from WCG loan expert, Hans Bruhner is his column "Ask the Loan Man."

So let me start by clarifying one issue - I'm not encouraging people to go out and get over their heads financially. I'll stress over and over again that your credit rating is gold and don't ever risk it if your score is high! The mess will follow you for way too long to make anything worth bringing the score down.

What I am doing is encouraging people to take that ridiculous rent you shell out every month and turn it into a tax-deductible mortgage. Yes, the affordable homes around here may not be all that pretty or the "dream home" you're longing for. But it's a step in the right direction. I recently met a woman who has spent the last two decades buying fixers, fixing them up and selling them after two or three years. She's moved a lot! But she's worked her way up to a fine home that doesn't need fixing and she's settling down. In the mean time, she made a mini-career out of it - learned a lot and has the home of her dreams. Did it take her a while? Yes. Does she think it's worth it - definitely!

One of my favorite tales since last issue... one of the homes on the cover image was bought by a 20 year old man who works as a carpenter, has an investor to help with the down payment and is slashing over-grown blackberries, etc. with a machete, ripping out rot and digging in deep. He's pulled all the permits and expects to be living in it before winter. Yes, it needs a new roof - heck new rafters! Just about everything else as well, but the lot is 100' x 100', in a great neighborhood and he's a home-owner at 20! I'm proud of him and he's not even my kid!

Another home on the cover...the one listed at $120,000 is down to $99,000. Depressed market? Great time to buy a home! Heading toward winter when people get desperate to sell? Great time to buy a home! Lousy loan issues in the news with lenders going out of business? If you have good credit, it only limits you to decent lenders who didn't get themselves into trouble. One of my new advertisers, Martha Farley, used to be an independent. She now works for Washington Mutual and says people need to get away from the concept that banks are to be avoided. Make sure they're on your list of researching options. If you're buying an inexpensive house, even if it's in decent shape, you want your loan research to include all possibilities. Just 'cause.

And here's one for people who say "but I don't have a down payment!" In my conversation with my sister about the article...she's a realtor in Florida she mentioned "Get 10 mini-loans if you have to! Put them in your savings account for three to six months and go Stated Income!" Funny thing - that's one of the suggestions Kyla Brooke from Frank Howard Allen Russian River in Guerneville mentioned when I interviewed her. It's exactly what she did to get her first home. It also shows how much people trusted her. Trust is a big issue. If the lenders are gong to trust you... which is what they do when they lend you money... then you are trust-worthy.

Your friends and family might think enough of you to help out as well. Sometimes relatives will even consider giving you down payment money as a gift to give you a leg-up. I got gifts from my grandmother and great aunt who raised me in my teen years, simply because they love me, wanted to see me settle down and considered this a way to help me. Gift money doesn't add to your debt burden so it's even more appealing when looking for a loan.

And here's my favorite way to get down payment money that has come and gone over the years - Equity Share partners. I'm not sure why it became unpopular for a while - but it's back. It's how I got my house. I asked my ex-husband to help out and invest in my home. Within 12 years I paid him back by doubling his money. His credit score was better than mine at the time as well, so it helped secure the loan. The San Francisco Chronicle Magazine - July 15th issue, has an article titled, "How to Break into the Housing Market, Even Now (Hint: Use other people's money)." There's even a web site now: www.homeequityshare.com where they match investors with buyers.

When I mentioned the concept to a friend of mine who has money he wants to invest in something, I suggested he partner up with someone he trusts who wants to buy a home. The bottom line is that the home-buyer takes the full burden of the house from maintenance to taxes. The investor's burden is waiting to get bought out. But consider that investing in real estate as a landlord has the same risk but the added burden of maintaining the home and dealing with renters who are not personally invested in the property. You can see why equity share looks mighty good in comparison. You invest in real estate - which if the home is a fixer will only improve over time as the house improves - with none of the burden of fixing it! Not bad!

Another method Kyla mentioned is sharing in the purchase of a home. Take a look at some of the real estate ads in this paper and you'll see that the concept is out there. Multi-story homes with more than one unit are a big part of river properties. Find someone you trust to share the maintenance of a home with - again that issue of trust - and two people/families get to pool their funds and purchase their own home! When you think of it, no matter who is lending you the money, it's a partnership built on the trust that you will make the payments on time, keep the property maintained, and if it fails, the property is still worth the amount of the loan, so whoever holds that loan will get their money back when the property is sold.

Gosh - there's so much more to tell - so I'll continue this next month. In the mean time, you might want to talk with Scott Johnson at Russian River Realty in Guerneville to get a copy of his newsletter that talks about financially distressed properties. It may seem a bit like taking advantage of another person's misfortune, but foreclosures are part of our current reality and these people who got themselves into a jam really need some help getting out of it! If they can sell before going into foreclosure, everyone benefits. These are called "Short Sales" where the seller is willing to cut the price to get out with their credit intact. Michelle Koenigshofer of CPS (a long-time advertiser) is a Short Sale Specialist, which means she has her finger on the pulse of people just wanting to get out from under. It may be a lot of extra paperwork for a realtor to do these kind of sales, but they are performing a service for both the seller and the buyer.

I encourage you to look at the Advertisers Index on page 4 to find real estate ads that might have what you are looking for, and you can go to the WCG web site at www.westcountygazette.com and get into the Advertisers Index which has links to their web sites for deeper research, www.greathomes.org is a good source as well as www.mls.com. Find a house, a realtor to walk you through the paperwork and you're home!

Affordable Homes Part 3 »