How to Find a Home in Today's Market

Over three years ago, Visnu Gonzalez was manning a machine gun in Fallujah as a Corporal in the United States Marines. A sniper’s bullet to the neck of the soldier left him paralyzed from the waist down. His family was devastated upon hearing the news, but glad he survived. Relatives begged him to stay with them, however, their homes were not easily accessible for someone in a wheelchair. Gonzalez’s dream for a home of his own faded quickly from his own mind. His mother, Maria Baez, however, was determined to find a way for her son to have an accessible home.

Enter “Homes For Our Troops”

Through research, Maria found an organization called “Homes For Our Troops” based in Taunton, MA. The organization is geared to helping returning disabled vets to obtain accessible housing. The non-profit organization was founded by John Gonslaves in 2004 as a 501(c) (3) non-partisan organization. The home was built by volunteers in New Milford county. Visnu and his mother, Maria, are happy to share a home that is accessible and energy-efficient. The Gonzales family has been truly blessed.

Foreclosures

However, American homeowners in general are under attack by predatory loans gone bad. With rising home prices, individuals were and are forced to pay increasing loan rates on houses that are overpriced. Loan companies like ravenous wolves offered bait to homebuyers by offering creative financing that sounded too good to be true - and in most cases it was. Some ways to mortgage a home beyond a buyer’s means including;

KICKBACKS TO MORTGAGE BROKERS: Otherwise known as Yield Spread Premiums. A broker gets a loan at a lower interest rate, turns around and offers only the higher rate to perspective home buyers. This usually yields a kick-back to the broker.

FALSIFYING LOAN APPLICATIONS: A lender overstates a borrowers’ income as greater than it actually is in order to gain approval of a loan.

ADDING IN-SINCERE CO-SIGNERS: Lender signs a non-existing co-signer in order to facilitate loan approval.

LOANS TO MENTALLY-INCAPACITATED INDIVIDUALS: Loans being approved to persons unable to understand what their responsibilities are as a borrower.

FORGING SIGNATURES: A lender forges a borrower’s signature on an early disclosure form.

LTV ABUSES: Loans in excess of 100% loan to value.

BAIT & SWITCH: Substantially changing loan terms at closing.

HIGH RATE CHARGES: Above market annual interest rates.

HIGH POINTS: Padded closing costs.

HIGH LOAN ORIGINATION FEES: Fees substantially higher than current market rates.

BALOON PAYMENTS: Significant boost payments at intervals and towards the end of a loan period.

NEGATIVE AMORTIZATION: Principle balance increases, rather than decreases over the life of the loan.

PADDED APPRAISALS: Cost-inflated home values in appraisal.

PADDED RECORDING FEES: Unnecessary “add-on” costs.

BOGUS FEES: An example would be a broker who claims HUD charges an “underwriting” fee, when in fact HUD has no such arrangements with the broker.

ITEMIZING DUPLICATE SERVICES: Charging separately for duplicate services.

CREDIT INSURANCE MISINFORMATION: Misinforming perspective homeowners insurance is required, or denying buyers knowledge that the broker is getting a commission on the sale of the insurance.

MANDATORY ARBITRATION CLAUSES: Charges for services when such is not the case.

FALSYFYING INFORMATION ON LOANS: Deliberately identifying loans as lines of credit or open-ended mortgages when such is not the case.

FORCED PLACED HOMEOWNERS INSURANCE: Lender falsely claims that client lacks homeowners insurance, selling it to them, then collects an undisclosed commission on the sale.

FLIPPING: Repeated refinancing.

DAILY INTEREST: Added late payment fees.

EXCESSIVE PREPAYMENT PENALTIES: Greater than expected fees if loan is retired earlier than scheduled.

FORECLOSURE ABUSES: Charges, fees and actions that are questionable as legally allowed under the law.

HOME IMPROVEMENT SCAMS: Illegal activities that have negative financial results upon the buyer of contracted and/or agreed upon services.

Variable interest rates while sounding attractive may not be a good way to go. If rates skyrocket, you may be liable for more fees than you can afford. Fixed fees is an insurance against sudden high interest hikes - remember, you can always refinance for a lower fixed-rate when it makes sense.

Foreclosures are at a record high. The housing bubble began to burst in 2006 when inflated prices and loan practices drove consumers away from the housing market. As home values drop and banks are desperate to unload foreclosed-upon homes, this may be a good time to buy - provided one has the finances to do so. The thing to remember is not to get into a home via the questionable practices of Creative Financing, lest one finds themselves facing the dire circumstances of the previous owners.

Distressed Home Sales

You’ve seen the ads. A company is willing to take a home off your hands by paying you below market values. These are usually tradesmen looking for homes where an owner is unable to meet the payments, or prohibitive in cost repairs make it more attractive to sell rather than lose a house to foreclosure, or risk losing the home through an order to vacate due to structural problems or other reasons. These companies pay cents on the dollar for the privilege. If it’s the only way, so be it.

There are also organizations that teach you how to buy distressed homes for below market values - think “fixer-upper”, a home that usually needs extensive and expensive repairs or renovation to bring it up to code. If you have “do-it-yourself” skills, this may be a viable option - however if you don’t - stay away! Labor in most circumstances is higher in cost than materials these days. Without sweat equity, you may find yourself spending more than the structure is worth. Keep in mind, if you don’t know what you’re doing, you risk creating more damage then you solve. If you bought the home for investment, such as renting or making minor repairs and reselling, and don’t have the skills, you may be doubly cursed - an investment that costs more money in a depressed housing market with a negative cash flow as a result.

…think twice before considering this approach…

…or take basic and advance home maintenance courses at a local college.

Build Your Own Home

Actually a very good idea. You’ll need to do a sufficient amount of home study of course, however, if done right - there is the end result of a home built around the needs of your family and you. Done badly, and it becomes an extensive mess. Never take any step lightly, and as you learn - gain experience! Its important to understand the land you build on as well the materials in the structure itself.

…there are two ways to build your own home - contract the labor out, or physically build it yourself…

If you can afford the money, and don’t have a lot of time to spare - contract out the job to a builder. Just make sure to take the time to find a reputable builder that you’ve done your homework in investigating their work. For instance, checking with local building departments to possibly provide you with leads towards experienced and accepted contractors - including a check with the local Better Business Bureau, including online investigation. Even if you hire a builder, it’s a good idea to inventory costs of materials yourself - including if you bid the job out. You’ll know whose price is over inflated, but just as important is understanding a lowball bid could be even worse. Remember, a contractor is in business to make money, he/she has to pay skilled labor costs - if the bid sounds artificially low, you might want to pass - some shortcuts will be made that could very well be detrimental to your investment.

SWEAT EQUITY…

You know, rolling up the sleeves and grabbing that trusty hammer and doing it yourself. Just understand what you’re doing before pounding that first nail! You’ll need to study, investigate and experience before you can start your own project. And if possible, it’s a good idea to have a few good friends along for the ride! Sweat equity means you essentially become your own contractor. Its making a commitment for a large project - not for the faint of heart. And even if you are up to the challenge, there is a lot of prep work in advance of the project. You need to read up on how to pick a build able lot, preparation of the ground, arraigning for delivery as material is needed - as well picking the right materials for the job, getting a utility hookup to run the power tools, digging trenches for sewer and water. Knowing how to negotiate with the building department before the framing takes place. From the first day on the lot, you’ll spend anywhere from three months to a year depending on the size of the house and expected weather delays. Is it worth it? That’s a definite yes, especially if you can’t afford a home any other way. Also keep in mind, if you know your house, you’ll save a ton of money in cost of repairs over your lifetime. Another advantage, your home will naturally be more (if you do it right) energy efficient, than homes built beyond a decade before your own project.

…take your time, do it right!

KNOWLEDGE IS POWER!

Before beginning on any quest, its important to have a full understanding of what’s involved. Building a house is no exception. It takes a lot of preparation - understanding how a house is built from the ground up, understanding materials and tools, experiencing “on-the-job”, learning from someone else’s building project and designing a home that meets your needs now, and into the future. Coordinated teamwork is essential if the job is to be done right.

Begin by reading a book on building - not just any book, but a special one called “Ortho's BASIC HOME BUILDING - An Illustrated Guide ISBN 0-89721-235-5 / Library Of Congress 90-86167. No new copies are available, but used copies may be found at Alibris Books, Amazon and Barnes & Noble. What makes the book unique is both its writing style and graphics are clear and concise. The book even tells you what tools you’ll need each step of the way. Check it out at your local library, however, buy the book! Look for one listed as “Like New” to “Good”, you’ll thank me for this advice.

As you read the book, play around with some architectural software to get an idea what you want to build. Two recommended are made by Punch Software and Better Homes & Gardens. The best choice from BH&G is Home Designer Suite 8.0 by Chief Architect for around $100. Punch Home Design Architectural Series 18 or Series 4000 - both in the same price category as BH&G. There may be cheaper versions from both companies and other software concerns - but you’ll only frustrate yourself by buying something less.

To get the best out of the book and software, it’s a good idea to hang around Home Depot and Lowes or other large home center and lumber store. Look over the quality of wood, roofing and other materials. Know what’s out there. The more familiar you get with the items you’ll need, the better choices you’ll make. In the aforementioned book are a list of tools you’ll need throughout the process of home building. A good place to research aside from the stores, and perhaps an important beginning point is visiting manufacturer’s tool sites to understand what is available. There is a really great “tools” page at House & Cottage - you’ll find it at http://www.houseandcottage.com. After seeing what’s out there, head to Amazon.com to check the user ratings on the various tools you are interested in.

GETTING THE EXPERIENCE

There is no shortcut to being knowledgeable about homebuilding, than actual “hands-on-experience” in construction. However, unless you have a union journeyman card, you won’t be allowed on a professional site. However, there is an excellent way to learn - including working side-by-side with experienced tradesmen - think Habitat For Humanity, The Fuller Center For Housing as well Homes For Our Troops. These are three major voluntary building groups that offer volunteers the homebuilding experience.

Volunteer and learn!

Realize by joining these groups or any other similar groups, you’ll learn crucial skills you need to know before you begin your own project. If you join, its important to know you are making a commitment of time and labor - but what you gain from the experience is more then you’ll ever imagine. it’s the skills you’ll learn close-up, an ability and reasoning to overcome unexpected problems which occur from time-to-time. And it’s a great way to network with others sharing the same experience - people who might be interested in helping you with your own building project. And if you are young and really put yourself into it, you might find it’s a new career and the door into a construction union and great pay and benefits - beats the hell out of working for Walmart! To “buffer-up” your skills, you may even want to go as far as taking basic courses on carpentry, plumbing and electrical. Aside from gaining experience for your own building project, it may open up a whole new career. If possible, encourage some good friends to join you!

…for more information, contact;

Homebuilding Organizations

The Fuller Center For Housing
701 South Martin Luther King Boulevard
Americus, Georgia 31719-2257
229.924.2900 / 229.924.2901
www.fullercenter.org

Habitat For Humanity International
121 Habitat Street
Americus, Georgia 31709-3498
800.422.4828
www.habitat.org

Homes For Our Troops
37 Main Street
Taunton, MA. 02780
866.7.TROOPS
www.homesforourtroops.org

…as to receiving help from any of these groups, there are qualifications to be met, however even if you don’t qualify, they are open to responsible volunteers - and any way you look at it, the experience is highly valuable!


LAND ACQUISITION

If you decide to build from scratch, its important to make the right choices. This like many steps are important to doing it right. The best advice is staying away from flood plains or areas where there is land erosion. Another is choosing an area you’ll be comfortable with - avoiding high crime or over-crowded neighborhoods. You also want to consider good schools for any children you may want to have down-the-line, if you don’t have them already. Look for a lot that’s build able. A good way to find out is looking at plots in city and county map rooms - look in both places. Sometimes the individual city/suburb books are out of date - not a good thing, especially if you decide to go to a land auction. Carefully visit any site before you bid, stay away if there are no access roads or egress to the property. Land locking is illegal in most areas - but it still happens. Keep in mind, banks do not like to loan money for vacant land - start putting money away as you look.

ACQUIRING MATERIALS & STORAGE

There are various ways to acquire materials - you can buy them new or used(not recommended), you can pay cash or charge(not recommended) for them. Getting donated materials for your project is a “mixed-bag”, make sure you have a copy of your materials list, so your benefactors understand what you need, and keep them aware of what you have to avoid duplications and possibly hard feelings and misunderstandings down the road After knowing what tools and materials you need, find a place for materials storage. Usually a shed with a stone floor is a good idea - minimum size, 12’x12’ or better. Other places to consider storing include garages and basements - just don’t advertise where materials are being stored! Make sure wherever you store the materials, that they will be safe as possible from pilfering. Insurance is also a good consideration. Between the two, buy the tools first. The more that you buy with cash, the more you’ll save on interest rates on charge cards which are brutal. Also remember, you’ll erode your borrowing position with the lending institution if you are carrying too much unsecured debt. By purchasing as much material up front, means the less you’ll have to borrow later - and the less interest costs you’ll rack up in the process.

TREAT YOUR HELP WELL!

If you have anyone helping you through the construction phase - remember THEY ARE GIVING UP TIME TO HELP YOU! RESPECT THEM! If you push or bully even one person, others will walk off the job - and then you’ll REALLY be screwed! Chances of getting them back after an incident are slim to none! Bring free donuts, hamburgers and non-alcoholic drinks to the site - rent a port-a-potty during the construction phase, fans and a heater when inside work is being done. Keep them happy with a good attitude! At the end, throw a great house-warming party for your crew - they really deserve it! And for anybody planning their own building project - offer your services when the time comes…AND KEEP YOUR WORD!!! After all, if they are nice enough to help you, you should be willing to help them! DON’T WELCH!

Wrapping It Up

As a writer, I like to cover a subject as thoroughly as possible. Sometimes I admit it may seem I get off the beaten track. But if I’m going to write about the problems, I like to offer some solutions along the way. Both commercial home building and labor costs will continue to rise - so will household utilities. Anyway you can reduce operating costs and any aspect of home maintenance, the richer you’ll be for the effort. Think green in your choices - use solar and wind turbine technologies whenever possible. Really keep in mind the utilization of gas or electric tankless hot water heaters! Home mortgage failures occur when an individual carries more of a debt-load than they can manage. Keep in mind, even if you think you’ve got it good financially, there is the unexpected that can throw you along the way - think layoffs and factory closings like Ford, GM and Chrysler. Finally, whether you build or buy a home - look for something that will serve you now - and through your lifetime - none of us are young forever!