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Thread: Refinancing a home loan may get tougher

  1. #46
    Elite Member Algernon's Avatar
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    I have posted about a particular friend of mine before who, for some reason, just had to have a brand new home. When my husband and I bought our home, we had to hold ourselves back when we were presented with a home we loved that went over our 'limit'. It was hard, but we found a reasonable 35 year old ranch with very few problems. We stayed within our limit (which btw was HALF what we 'qualified' for) and have been here five years. We have never had a problem paying the mortgage, even through a period of unemployment on my end, and an even longer period of unemployment on my husband's end. Is our house a 'dream house'? Hardly. It is a practical and comfortable home that we can afford.

    My friend and her hubby make less than we do and got caught up in needing a brand spanking new home. I won't call it a McMansion because it is tiny, but it looks spiffy from the outside. I told my friend over and over again how many homes were in our city that were so affordable but for some reason she couldn't settle. I felt like she looked down on my house, but it didn't bother me in the slightest.

    Well they got their house...actually they had it built. She admitted that every extra dollar had to go to the mortgage. She didn't seem to realize that the first year of a newly built home only includes the property taxes on the land, not the house. A year after living there her house payment drastically increased due to the tax issue. Now all we ever hear from her is how broke they are...and they are even unable to have kids at the moment (which is something she has desperately wanted since they got married 10 years ago) because there in no way in hell they could afford a single diaper for a baby, much less everything else.

    They are a slave to their home and it was completely unnessecary in our part of the country. There are tons of affordable homes, but she just couldn't stomach looking around for an old house. My husband and I looked for 3 months, were showed more than 20 houses before we found the right one. And honestly, when I go to her house I am not envious at all...her house has no character, is a cookie cutter home in a cookie cutter neighborhood, and already has structural problems. I don't see how that couple is going to avoid bankruptcy. Even if they wanted to sell they would take a huge loss.

    *shakes head*
    Value the future on a timescale longer than your own. -Richard Dawkins

  2. #47
    Super Moderator Tati's Avatar
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    I agree with Al, Gator and AO - the consumers are definitely driving the trend. In fact, when you do come across new developments in construction, or ads for them in the paper, you typically see a percentage of lots already sold, ie. "60% Sold! Buy Now!" - before the houses are even built. So obviously there's a huge demand and the developers are covered long before they've shelled out any real expense.

    My SO and I bought our first home almost two years ago in an expensive market - it's small, two bed, 1 bath, semi-finished basement, and over a hundred years old. But we are so happy with our decision to this day. It's in an actual old "neighbourhood" - you know, a community with shops and restaurants and other old houses that grew together organically, rather than a conglomerate of identical behemoths located about a half-hour's drive from the nearest market, like most developed communities. It needs some work, but it came with a gorgeous kitchen the previous owner had put in, which was a nice bonus. We've already painted and redone the flooring in two rooms, and will be redoing the bathroom in maybe a year's time when we can afford it. We're going to work on the exterior this spring, repainting the brick and refinishing the front porch. And we're lucky to live on a small street where our neighbours take pride in their old, small but cute homes - it seems everyone is always working on improving something, and this bodes well for the market in the area. We also stayed within our means and got a terrific fixed mortgage rate. It is interesting that I don't know many other young people who've bought older, fixer-upper homes - I think you folks upthread are right on when you say that so many young people feel entitled to a perfect new home right off the bat. When they can't afford McMansions, they go for the designer condos (at least those are an efficient use of space).

    I say all this simply to emphasize that there is a lot more to consider when buying a home than the square footage or a stainless steel appliance package. You can do a lot with a small space if you budget for improvements and don't price yourself out of your market. Location is paramount. And finding a home that could actually take some work can yield far greater returns than one that is already perfect. What improvements can you make to a "perfect", cookie-cutter home?

    There's also nothing wrong with renting, and the myth that owning a home is the greatest personal achievement you'll ever have is just that, a myth. We would probably still be renting if rents in this city weren't so high - it's a little different from Vancouver, which is I think Canada's most expensive city to buy in, by far: in Toronto, rent is almost invariably pretty high, but there is a pretty big range in the buying market, so it can be cheaper than renting. As it stands, our mortgage is about what our rent would be for a space 2/3 this size (depending on location), and it was a good time to get into the market, so we went that way. I'm not "proud" of the fact that we "own" (it's mortgaged of course), but I am proud that we made a good decision for our circumstances. So many people get caught up in the trappings that they don't fully appreciate the reality.
    If you reveal your secrets to the wind you should not blame the wind for revealing them to the trees.

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  3. #48
    Hit By Ban Bus! AliceInWonderland's Avatar
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    There's also nothing wrong with renting, and the myth that owning a home is the greatest personal achievement you'll ever have is just that, a myth.
    yeah exactly. thats one thing i learned in my REAL ESTATE PRINCIPLES class when i was becoming a real estate agent!

    that whole stupid myth was perpetuated by the real estate industry when in reality you are just working to pay off your mortgage and taxes and insurance and for what?! its constant upkeep and stress and maintenence. I can't tell you how much stress our house growing up caused my parents and us. Since we've moved out my parents sold and are so happy to own as little as possible and rent a place that they have no liability over; its such a relief for them! I certainly dont feel bad about renting either...for now

    Robert Kiyosawki (not how you spell it) would agree! ^

  4. #49
    Hit By Ban Bus! UndercoverGator's Avatar
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    Yeah, exactly! Recently I've shelled out for a new furnance/AC system, new duct work, a new roof and a remodeled bath. And we had our house custom built. But it's 17 years old now and due for some TLC, this isn't the first time we've sunk money into the house.

    Tati, we wanted to do like you did, get an older smaller place but ran into a problem finding what we wanted so we bought into a new subdivision surrounding a golf course where the developer was going under because he's plowed so much money into the place and most of the deals for the houses fell through. If it hadn't been for the fact that he was eager to move the places and we got about 1/4 of the price knocked down pre construction we wouldn't have bought here, we would have kept looking for a small ranch or farmhouse to remodel. We got a bargain. But it's not huge, we have four bedrooms, two quite small and it's a standard Cape Cod, nothing fancy at all. Pretty cottage type home.

    One of the biggest problems with owning instead of renting is when something breaks you gotta pay to fix it. We've replaced all the kitchen appliances, replaced the linoleum and carpet with wood floors, tiled the baths, etc, etc, etc through the years for a serious chunk of change. We couldn't have afforded to buy the house with all the extras we wanted so we've just done them ourselves gradually as we could afford it. I'm glad we were penny pinching because the place was nice before but is quite nice now because we were thrifty and upgraded when we could. Next project is to remove a wall and expand about ten to twenty feet out so we can have a family room off the kitchen and a formal dining room as well as make the upstairs bedrooms bigger.

    But the penny pinching part of me wishes we lived close enough to Detroit to be landlords. The sub prime bust there has created the lowest prices yet.. look at this article.. Some of those houses went for less than some of my jewelry is valued at!

    Houses cheaper than cars in Detroit

    By Kevin Krolicki Mon Mar 19, 11:48 AM ET

    DETROIT (Reuters) - With bidding stalled on some of the least desirable residences in Detroit's collapsing housing market, even the fast-talking auctioneer was feeling the stress.
    ADVERTISEMENT

    "Folks, the ground underneath the house goes with it. You do know that, right?" he offered.

    After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: "The lumber in the house is worth more than that!"

    As Detroit reels from job losses in the U.S. auto industry, the depressed city has emerged as a boomtown in one area: foreclosed property.

    It also stands as a case study in the economic pain from a housing bust as analysts consider whether a developing crisis in mortgages to high-risk borrowers will trigger a slowdown in the broader U.S. economy.

    The rising cost of mortgage financing for Detroit borrowers with weak credit has added to the downdraft from a slumping local economy to send home values plunging faster than many investors anticipated a few months ago.

    At a weekend sale of about 300 Detroit-area houses by Texas-based auction firm Hudson & Marshall, the mood was marked more by fear than greed.

    "These people are investors and they know the difficulty of finding financing. They know the difficulty of finding good tenants. They're cautious," said realtor Stanley Wegrzynowicz, who attended the auction.

    HOW LOW IS LOW?

    The city, which has lost more than half its population in the past 30 years and struggled with rising crime, failing schools and other social problems, largely missed out on the housing boom that swept much of the country in recent years.

    Prices have gained less than 2 percent per year in the five years since 2001, when the auto industry entered a renewed slump.

    Steve Izairi, 32, who re-financed his own house in suburban Dearborn and sold his restaurant to begin buying rental properties in Detroit two years, was concerned that houses he thought were bargains at $70,000 two years ago were now selling for just $35,000.

    At least 16 Detroit houses up for sale on Sunday sold for $30,000 or less.

    A boarded-up bungalow on the city's west side brought $1,300. A four-bedroom house near the original Motown recording studio sold for $7,000.

    "You can't buy a used car for that," said Izairi. "It's a gamble, and you have to wonder how low it's going to get."

    Detroit, where unemployment runs near 14 percent and a third of the population lives in poverty, leads the nation in new foreclosure filings, according to tracking service RealtyTrac.

    With large swaths of the city now abandoned, banks are reclaiming and reselling Detroit homes from buyers who can no longer afford payments at seven times the national rate.

    Michigan was the only state to see home prices fall in 2006. The national average price rose almost 6 percent but prices slipped 0.4 percent here, according to a federal study.

    The state's jobless rate of 7.1 percent in January was also the second highest in the nation, behind only Mississippi.

    HOW MUCH CAN YOU BUY FOR $1 MILLION?

    Mayor Kwame Kilpatrick was greeted with applause when he announced last week that two condominiums in the city's revitalizing downtown sold for over $1 million each.

    But investors, including some from out of state, proved far more cautious at Sunday's auction.

    In the most spirited bidding of the day, a sprawling, four-bedroom mansion from Detroit's boom days with an ornate stone entrance fetched just $135,000.

    Dave Webb, principal at Hudson & Marshall, said Michigan had become a "heavy volume" market for his auction firm in recent years, although bigger-money deals were waiting in California, a market he said was ready for the first such auctions of repossessed property in years.

    "These people that are buying have got to look at holding on for five to seven years," he said. "The key is holding power."

    Even with the steep discounts on Detroit-area properties, some buyers handed over their deposits with a wince.

    "I'm not sure it's congratulations," said Kirk Neal, a 55-year-old auto body shop worker who bought a ranch in the suburb of Oak Park for $34,000. "My wife is going to kill me."

    Realtor Ron Walraven had a three-bedroom house in the suburb of Bloomfield Hills that had listed for $525,000 sell for just $130,000 at the auction.

    "Once we've seen the last person leave Michigan, then I think we'll be able to say we've seen the bottom," he said.
    Houses cheaper than cars in Detroit - Yahoo! News
    Last edited by UndercoverGator; March 20th, 2007 at 07:08 PM.

  5. #50
    Hit By Ban Bus! AliceInWonderland's Avatar
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    ^ Omg thats just sad.

  6. #51
    Elite Member JamieElizabeth's Avatar
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    "Folks, the ground underneath the house goes with it. You do know that, right?" he offered.

    Well, duh, obviously the land isn't worth that much.

  7. #52
    Hit By Ban Bus! AliceInWonderland's Avatar
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    ^ the land is, but you can't/shouldnt insure land; thats wasteful.
    Last edited by AliceInWonderland; March 21st, 2007 at 05:16 PM.

  8. #53
    Elite Member louiswinthorpe111's Avatar
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    I hate this article for a couple of reasons. One, you get the impression that any average joe can just go buy a house at the sherriff's auction. If you are inexperienced you have a couple of problems. Houses sold at sherriff's auctions may not have clear title. Meaning, the IRS could have placed a $50,000 lien against the property for back taxes and you have just now acquired the lien with the property. Second, you have to pay the whole amount by either cashier's check, or 10-20% down, cash, with 3 days to get financing. If you can't financed, you don't get your deposit back and the property goes back up for sale.

    Unfortunately, we are just seeing the beginning of the foreclosures coming....

  9. #54
    Hit By Ban Bus! UndercoverGator's Avatar
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    The thing about land is that is always has some value, it is stable when things like gold and oil are not. My father drilled that into my head because my greatgrandmother was an extremely wealthy woman who was relatively unaffected by the Great Depression in contrast to many other people. Why? Because she had invested in land and had many tenant farmers and sharecroppers. One of her sons jumped out of a window on Wall Street on Black Friday and the others in her family suffered many privations, but she did not because much of her wealth was in land. Good thing too because my grand parents ended up losing their business and having to tenant farm one of her plots, it kept them from starving and losing everything they owed.

    The sad reality is that those with solid financial planning and secure investments, like real estate, will ride out any recession, while those that foolishly gamble and speculate will ultimately pay for their mistakes.

  10. #55
    A*O
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    God isn't making any more land....... It will ALWAYS have an intrinsic value.
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