Are you SPOOKED Buying a House? HAUNTED by the 20% Downpayment? Not a GHOST of a Chance You Can Buy?
Ted and Sue Zombie Want to Buy a House
The recession not only took the homes of people who could no longer make their home payments, it erected barriers to homeownership by those seeking to move to another neighborhood, another part of the country, to remodel or upgrade their own home, or, to buy their first home.
The biggest barrier is the reliance on a 20% downpayment that insures buyers have enough "skin in the game" or enough financial backing to make them credit worthy. For a $100,00 home this means having $20,000 cash at settlement. In a high rent area of the country such as Washington, DC, San Fransisco or Boston a buyer might need $40-$60,000 cash. Not many of us have that kind of cash available.
Don't be spooked! Don't be haunted! Here are some treats which can reduce your downpayment and closing cost expenses helping you on your way to homeowership.
Take action now!
Don’t be a zombie!
1. High Credit Score. No tricks - only a treat! People with high credit scores receive lower interest rates. This is one treat totally within your discretion to achieve or change and maintain. A credit score of 700 is your target. You don’t have to earn big bucks to have a high credit score. Get a copy of your credit reports from Transunion,Experian and Equifax. You are entitled to a FREE credit report from each company once a year. Comb through them looking for anomalies. You may have incorrect data on your reports. You can have these corrected. If you have a problem, clean it up and repair it. A good credit score will open lender’s doors for you.
2. Reapply for a loan. If you were one of the folks caught in the recession in 2008 and you suffered a short sale or foreclosure … your required waiting period is up and you can re-apply for a loan. Welcome back to the mortgage market and your new home! A lovely treat! Waiting period for a short sale = 4 years. For a foreclosure = 7 years.
3. Federal Government Loans. No trick here! Consider a Federal Housing Administration (FHA) insured mortgage loan or Department of Veterans Affairs home loan guaranteed mortgage. Not all lending institutions offer FHA or VA loans. Not all sellers will want to deal with an FHA approved loan because it is more bureaucratic. But these loans are available and secure. Depending on the loan product you may have to pay PMI (See #7 below).
4. Do you have a 401(k)? Do you know that unlike an IRA or ROTH IRA you can borrow funds for a home purchase from this retirement fund with out penalty? You can borrow up to 50% of your 401(k) funds with a cap of $50,000. This is not a free treat! You do have to pay it back. You do pay interest although usually below standard financing institutions. It has to be repaid usually within 5 years with an extension for a home purchase. Plus … the time the money is not in your 401(k) means … it’s not earning money for your retirement. Check with a financial or tax advisor before pursuing this avenue to make sure it’s right for you!
5. Gifts. Super treat! Gifts from family members can be a key ingredient in your home purchase. Whether it’s $500 or $5,000 gifts of cash go a long way at settlement to reduce your costs. Be sure to have a well documented paper trail showing the money given to you is, indeed, a gift and not a loan.
6. Housing Authority Programs. Each state has a housing authority which receives funds from the Federal government to provide affordable housing programs. The programs may range from outright cash grants at settlement to below market financing to tax abatement. As always there are income and other qualifications such as first time homebuyer status. Check with your state or local housing department to find out what programs are available and for which ones you qualify.
7. Eliminate PMI - Use a Piggy-back Loan. Not quite as available now as before the 2008 crash, a piggy-back loan can eliminate PMI. What is PMI? Why would you want to eliminate it?
If you have less that 20% as a downpayment at closing you will be subject to Private Mortgage Insurance (PMI). This is a monthly fee on top of your mortgage payment that guarantees the mortgage holder that the loan will be paid should you default.
A piggy-back loan meets the 20% threshold by making two loans one piggy-backing on the other. First you receive a loan for 80% of your mortgage. A second loan made through an equity line of credit is then made for 10% of the mortgage. You make up the remaining 10% as the downpayment. Voilá! No PMI. (Note: in any event, on a conventional, off-the-shelf loan, once you get your mortgage at or below 80% of what you borrowed the PMI can be eliminated.)
Honestly ... this is not a trick! It's a well thought out treat that can help you stretch your dollars when securing financing for your home.
8. Cutting back. Yep. Good ol’ fashioned savings. Bringing your lunch to work can save up to $10.00 per day or $2,510 per year for a single person. That $5.00 cup of latte you buy at work every day? $1,255.00. Give up your car? Use the Zip car calculator (or other car sharing calculators) to find out how much you can save by not owning a car. It’s astounding! Are you willing to forego cable? Reduce eating out by one dinner a month? Reduce movie going by one per month? In one year you could save a huge amount towards your downpayment. Another free treat!
Of course, the downpayment is not the only costs you will incur at closing. Closing costs include transfer fees, title search, taxes, etc. You need cash to go to closing in addition to the down payment. When you apply for a loan for the home you are buying the financing institution is required to send you a "good faith estimate" of the closing costs. One day in advance of settlement, a required "HUD 1 Settlement Statement" will detail all the cash you will need to bring to the table at closing. You can compare these two documents and ask questions of the lender prior to closing.
With the exception of raising children, buying a home may be the single biggest financial commitment adults make in the course of their lives.
Don't go batty. Investigate these avenues to financing your home. Talk to others. Learn as much as you can before applying for a loan. Go for the TREATS not the TRICKS. You won't be a zombie!
30 Year Fixed Rate Projections
2015 = 4.5%
2016 = 5.3%
Mortgage Brokers Association
Cited in Mortgage News Vol. 16 Issue 10
You remember the story? The First Little Pig built his house out of straw. The Second Little Pig built his house out of sticks. The Third Little Pig built his house out of bricks. The Big Bad Wolf huffed and puffed and blew down the first two houses but not the house made out of bricks. It was too strong.
But … was it affordable? Brick is durable but expensive.
That's so 19th Century.
A savvy 21st Century Pig might consider PAPER.
Cardboard tubing to be exact.
BIG construction TUBES to be more exact.
Think LOGS. Log houses.
Paper Log House, Kobe, Japan 1995. Shigeru Ban, Architect (Takanobu Sakuma)
Why would a cohousing group ever design a community made of cardboard tubes?
The architect, Shigeru Ban, is famous for pioneering and using paper tubing for 25 years so it’s got a track record.
Ban uses locally sourced, sustainable materials in building disaster relief housing in situations such as the aftermath of the hurricane that decimated Haiti or the Japanese earthquake. One of the materials he uses most often is: paper. Specifically, cardboard tubing that is used in textile factories or for casting concrete forms.
This is industrial-size cardboard tubing. Cardboard tubing is often used as the structural supports for a "temporary" building. But it’s also used as the finish for walls and other interior and exterior design features.
Paper Concert Hall L'Aquila, Italy. Built after earthquake. Shiregu Ban, Architect.
Paper Concert Hall L'Aquila, Italy, Interior. Shiregu Ban, Architect
Most of the paper structures Ban designs are “temporary” structures built to house people or restart activities quickly after a disaster at minimum cost and environmental impact.
That doesn’t make the structures less beautiful or useful. Even long term.
Cardboard Cathedral, New Zealand. Built after earthquake. Shigeru Ban, Architect
Cardboard Cathedral, New Zealand. Functions as place of worship, community center, concert hall and town center. Shigeru Ban, Architect
The “temporary” structures are sometimes used for a decade and then repurposed to another disaster site in another part of the world. So they are DURABLE.
Experience has shown it's sometimes hard to get people to leave the "temporary" houses for permanent abodes!
But what about RAIN? The cardboard tubes are coated with polyurathane, paraffin or other waterproofing. The Paper Hut below is open to the harsh weather of an island environment. Using cardboard tubing allows for ease in replacing damaged tubes.
Paper Hut National Forest of Yakushima Island(Japan) Shiregu Ban, Architect
It's DURABLE and Rain Proof!
Paper Hut Forest of Yakushima Island, Japan. Translucent material between cardboard tubes allows light to flood the interior. Shiregu Ban, Architect.
Another quality intrinsic to cardboard? Natural soundproofing inherent to the material-- a bonus in multifamily construction where the clicking of heels and conversations of neighbors are major issues of shared walls.
Insulation? Why not pack the tubes with your favorite sustainable, low cost, fire-resistant insulating material?
Plus there’s the added warm “feel” of the material.
Still can’t see building your home out of cardboard tubing? Then consider cardboard for low cost interior uses such as room dividers, ceilings or wall finishes. Or for building those “temporary” structures e.g. bicycle storage, children’s play areas, outdoor materials storage, etc., etc. etc.
O. One last thing. Cardboard tubing doesn’t burn easily due to the density of the material used to form the tube.
So, why would a 21st Century Pig use cardboard?
Easy to obtain
Easy to use
Can be insulated
Mixes well with other materials
Can be used inside or outside
So huff and puff, Mr. Big Bad Wolf.
You won’t blow down a cardboard house!
3D Printed Car Powers Solar Home ... 3D Printed Solar Home Powers Car ... A Marriage Made for Cohousing?
Oak Ridge National Laboratory (ORNL) 3D Printed Home and Car
In what can only be described as THE love match of technologies ... last month Oak Ridge National Laboratory (ORNL) unveiled an integrated system combining 3D print technology, solar and battery power.
Translation: ORNL wirelessly linked a 3D printed car and a 3D printed house.
According to ORNL ... a first-of-its-kind design uses an integrated symbiotic energy system to share energy between a single-unit, 3D printed solar powered house and a 3D printed electric car.
Translation: The solar panels on the house provide electric power for the car. On grey days, the battery in the car can power the house. Is this a love match, or what?
It's dubbed: Additve Manufactuing Integrated Energy or AMIE.
Will this new linking of cars and homes cause those of us in cohousing to rethink our design principle of corralling cars in their own space away from homes or booting them to the street?
Quoting from the on-line website 3Ders.org_ "When scaled up to a full-size community, AMIE could support worldwide electricity needs, completely revolutionizing how we generate, use and store clean energy. Thanks to a collaboration between more than 20 major industry partners and with the innovative use of 3D printing technology, AMIE went from concept to launch within just one year."
So now, a car in every garage is not just a political grab line like a chicken in every pot. A car, integrated with a home, could be the answer to both affordable housing and clean, fuel-efficient transportation.
This technology is here ... NOW. What it needs is a critical mass of early adopters to move it forward. What better than cohousing?
But why should cohousers even think about 3D printed homes and ... cars?
ORNL 3D Printed Card and Home
In this example of the car and house being linked, how useful is this to pursue when a major feature of cohousing design is purposeful separation of the car from the home? I'm sure cohousing architects will develop a design that will allow using this technology without abusing the cohousing design of pedestrian friendly streets.
Qingdao Unique Products Develop Co Ltd 3D Whole House Printer. 3ders.com
China's WinSun Group's Six-Story 3D Printed Mansion
In just five -10 years, you could be 3D printing your next cohousing home … and living in it within 24 hours!
Already the Chinese firm WinSun 3D printed a mansion, 10 houses and a multi-story apartment building.
Australian researchers say the unique advantages of 3D printing for affordable housing, emergency shelters and architectural flexibility are within the three to five year time range. Certainly component parts for housing could be manufactured using 3D printing saving time and, therefore, money.
Now check this out: Contour Crafting is a technology developed by Dr. Behrokh Khoshnevis University of Southern California, which allows a single house or an entire neighborhood to be constructed in a single run. Dr. Khoshnevis believes a 1-story home could be fabricated in 24 hours. He further believes a fully implemented 3D printed home with plumbing, wiring, tiling etc. could save about 60% over regular construction methods. The savings for affordable and emergency shelter housing could be higher. Of course, this technology has to be scaled up to be financially competitive for mass production for the current real estate market. The chief place in which savings can occur with 3D printed homes is in rising labor costs.
Are these homes environmentally friendly? Contour Crafting results in near zero waste after the construction of the home is completed. Unknown by me at the time this is being published is what material is used to create the home, how much energy is used to fabricate the home and how that balances out with the savings on time and zero waste. I have requested this information from Contour Crafting. Will update you as soon as I hear from them.
One of the many advantages of cohousing for developers is that its buyers are “early adopters.” They are often willing to be on the cutting edge of technology. Unlike standard development which is very, very conservative because its pool of buyers is conservative, cohousers are risk-takers when it comes to technology and the environment. So if this technology can save time, money and resources … will cohousing lead the charge? Will cohousing once again be ahead of the curve?
What do you think?
Is this technology is feasible?
Will it be adopted by cohousing?
One of cohousing's chief supporters and leaders, Tom Lofft of Liberty Village in Maryland, once gave me a list of reasons for becoming involved early on in cohousing.
To wit ... here is Tom's list. You may access a downloadable version of this list at the Resources section of this website.
Founding Member, Liberty Village Cohousing
The Top 10 Benefits of Early Participation in Cohousing
There are certainly many substantive benefits of being an early investor and committed burning soul in the cohousing formative stages.
The most important of these are having a strong Influence in the
1. decision making
2. site selection
3. design decisions
4. project budget
6. priority of choice in selecting a lot, site or unit in the final allocation of homesites
7. overall crafting the foundational values and norms of the community including the Vision, Values and Mission Statements
8. other normative decisions that are either explicitly or implicitly made in the process, including determining the process itself
9. the early friendships which sustain the community through the development process and over time in the life of the community
and, the most important one …
10. sharing of a lot more potlucks!
NOTE: Copyright all rights. Permission granted to use with attribution to Tom Lofft. firstname.lastname@example.org
Ann Zabaldo is a passionate promoter of cohousing. She was on the develoment team for Eastern Village in Silver Spring, MD and Takoma Village in Washington, DC where she lives. She serves on the Board for MAC.
See cool blog for Emerson Commons.