This is the headline on this morning's newspaper. It is a series of six articles on how and why the foreclosure rates are sooooo high in some neighborhoods. It is also a comment on how it affects us all, not just the individual home owners.
Let's start with the embarrassing information. Charlotte has the highest foreclosure rates in the state. Yikes!! These are our clients. Why aren't we protecting them?
Oh wait, maybe they aren't...there isn't mention of one single REALTOR anywhere in any of the articles. In fact, there is only mention of people driving by a big sign "$1 down gets you in." The article tracked four families. The overwhelming trend in thought seemed to be, "A dollar? Dang, let's do this!"
The builder, which, in this case, was Beazer Homes, (I want to interject something here. These articles happen to be on a Beazer neighborhood but we all know this isn't a problem that is centralized on one particular builder. This is a problem with the system which is currently in place) would take care of your down payment, take care of your closing costs, and assist you in the first two years of payments, by which time, you should be able to go it alone. You should have moved on up into a higher income in order to be able to afford your own financing.
Long story, short: 406 homes sold, 84% arranged financing through Beazer Mortgage, and, so far, 77 foreclosures. 29 of those foreclosures happened during the year the majority of folks in the neighborhood were assuming full responsibility for the loan payment.
Of the four families who were interviewed, all four families provided correct income information on the W-2s provided and discussed their debts with the loan officers. There ended up being discrepancies with each of the loan applications. Several had inflated income on the application, which was correct on the W-2s. Several say they were instructed to leave off various payments, such as a car payment, in order to qualify for the FHA loans.
Please,please, if you are a consumer looking to buy a home and you are unsure of what you can and can't afford, please take the following advice:
- Talk to your own lender FIRST. In fact, talk to several lenders. Get information in writing. This is called a GFE or Good Faith Estimate. It is an estimate but they are required by law to be honest and very close to correct. Work with a lender you trust. Work with a person. Have a name, not just an 800 number and a file number. Talk to them on a personal level to get to know how they operate in life and run their business.
- BE honest!!! Don't let your lender discount anything you feel is important. I had a lender tell me, during the purchase of my first home, "You monthly payment for daycare doesn't count." Shoot, have you priced daycare for a month. We were putting out $760 a month 10 years ago for daycare. IT COUNTS!! If you have a question whether something counts or not, ask yourself, "Will this affect my ability to pay a monthly payment?" If it will then count it!
- Don't get in over what you are comfortable with!! Chances are real good that you will qualify for much more money than you care to spend. Don't spend it. Decide what is a comfortable monthly payment for you and stick with it. You can tell a lender what the home costs, how much money you have in hand for closing, and what you want your monthly payment to be (including tax and insurance), and your lender can tell you what price range will keep you there.
- Remember the neighbors. How do I put this delicately? If it costs $1 to get in the neighborhood then all of your neighbors have, likely, done the same. This doesn't bode well for the outcome of your neighborhood. Take the time and have the discipline to save up for your down payment. You have to have this discipline to own a home. It doesn't stop with the monthly payment. If the water heater goes out then you must call a plumber , not the front office of the complex. Even if you can't afford a more expensive neighborhood, you can afford to buy the best neighborhood for your money. This is an investment, not a trap.
- Have a REALTOR!! Ask your REALTOR for a CMA of the neighborhood before you buy. Ask for a foreclosure history of the neighborhood before you buy. 35 starter neighborhoods were identified in the Charlotte Observer study as having a foreclosure rate of at least 20%. Protect your money. Protect your investment by making yourself aware fo these statistics before you buy.
- EVEN NEW CONSTRUCTION...HAVE A REALTOR - Builders are typically good people. Their on-site agents are good people generally. The on-site rep (we do not call them agents unless they really are a real estate agent. MANY ARE NOT REAL ESTATE AGENTS) has a job to sell the homes in the neighborhood. They are to be honest with you and sell, sell, sell! The on-site rep works for the builder. Get your own representation. The builder pays the commission and is 99% of the time already included in the price of the home whether you bring an agent or not. have someone being more than honest with you. Taking your best interest to heart.
- Read the paperwork. Understand what you are signing before you sign it. Ask questions.
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