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Pardon Our Dust
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Home Buying Strategy
Low on Cash, She Found a Good Place to Start
By Kathy Price-Robinson
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Home bought: Condominium |
Looking back, Valerie Lunden can't remember why, one summer, she sat down
with a calculator and added up how many dollars had passed from her bank
account to her landlord's in the previous five years.
It might have been the accumulation of 20 years of "renting and renting
and renting and renting," or perhaps is was yet another "hassle"
to get some minor thing repaired in her one-bedroom Studio City apartment.
But she recalls how she reacted to the five-year tally — more than
$35,000.
"I literally experienced a shortness of breath," said Lunden,
39, who works in marketing for the United Way in Los Angeles. The idea
of someone else getting tax breaks and increased property equity as a
result of her dollars, she said, was "nauseating."
Not bothering to total the total 20-year cost of renting, Lunden immediately
set her resolve to become a homeowner, even as she acknowledged the drawbacks
that would bring.
"Can you imagine I actually wanted to have a mortgage payment, pay
homeowner's association dues and property taxes?" she said, in addition
to property upkeep. Still, the idea of owning a property and getting tax
breaks outweighed her reservations.
Less than a year later, she walked through the front door of her own condominium
after escrow closed on a unit in Westchester — a two-bedroom, two-bathroom
HUD repossession that she has polished into an immaculate, tranquil haven
for her, her two parakeets, and the neighbor's cat who comes by often
for a visit.
At the beginning of her quest, Lunden, an Indian native educated in England,
pictured herself owning a small house with a yard, either in the Valley
or on the Westside near where most of her friends lived.
Trouble was, as several real estate agents she contacted more or less
stated, her modest income made her a "poor prospect." Plus,
she didn't have the 10 percent cash for a down payment required to purchase
a property.
"Or at least that's what I thought," she says now. "I knew
nothing before I started."
Although the first few hours of her quest started out badly, Lunden said
she was "left without illusions," and she jumped onto the Internet
to search out home buying opportunities for people in her financial condition.
Indeed, it was the Internet that finally led her to her home.
On the City of Los Angeles's web site, her hopes soared when she found
a program offering newly built homes, complete with yards, for low-income
people. "I was ecstatic," she said, and played phone tag for
two days before the return call revealed she made too much money for the
program. "How could this be?" she asked herself. "I had
been led to believe I was as poor as a church mouse."
During the call, though, she reached what she considers the "pivotal
moment" in her search when the city employee, whom she describes
as "a compassionate person," recommended that she find a mortgage
lender that specializes in financing programs for low-income homebuyers.
Lunden was also told that she should become pre-approved for a loan before
searching for a particular property.
"You should get pre-approved for any program," said Mary Neal
Swift, the lender that Lunden found on the City's website. "It's
a seller's market," she explained, and having approval for a certain
loan limit allows a buyer to move fast when the right property is located.
Lunden said she was too nervous to meet with Swift, and yet she made the
appointment anyway, filling out the financial disclosure papers that were
handed her.
"She was scared," Swift recalled, and so she comforted Lunden
with anecdotes from her own home buying and home owning experience. Plus,
she told Lunden what she tells most of her clients:
"You're going to be scared. You're going to be on an emotional roller
coaster." She gives them her home number and says to call anytime.
"I'm your therapist for the next 60 days."
Even though Lunden found Swift to be friendly, empathetic and knowledgeable,
that didn't soften the disappointment with the amount she could qualify
for: "a measly $125,000."
Still, Lunden decided to shed any remaining "grand illusions"
about the kind of property she could buy and to focus on finding one that
met these criteria: one that was within her price range, close to her
job, located in an area where it would appreciate in value, and where
she would be willing to live for five years. Plus, after living in one-bedroom
apartments for so many years, she yearned for more space.
Expanding her Internet search, Lunden found the HUD site, and listings
of thousands of distressed or foreclosed-upon properties that were for
sale.
In November, searching by zip codes of her favored Los Angeles neighborhoods,
she found three properties that interested her. One, a condo with a Manchester
zip code, was listed at slightly more than her qualified amount. She took
to heart Swift's admonition not to "overbuy," and watched the
listing every week.
Late in December, the condo was reduced to $110,000 and Lunden rushed
out to take a look at the building, a 50-year-old renovated apartment
complex, with security gates and secured parking, on a quiet, tree-lined
street. "I felt immediately comfortable about the idea of living
here," she said.
It took a week to find a HUD-approved real estate agent and to see inside
the unit. Although the condo, converted from an apartment in the 1980s,
needed carpet and paint, Lunden was sold on the tile floors in the kitchen
and bathrooms and the sharp white cabinets with wood trim. That is was
in a "questionable" neighborhood close to Inglewood did not
phase her when she spotted a police station nearby.
Using her knowledge of loan programs, Swift offered Lunden an CALFHA (California
Housing Finance Authority) loan with a "2-1 buydown," which
means the 6-3/4 percent interest rate would be reduced to 4-3/4 percent
for the first year of the loan, then raised to 5-3/4 percent for the second
year, and then finally to the full amount. This program, Swift said, "eases"
clients into their house payments.
All told, Lunden's cash contribution was about $4,000 for closing costs.
Today, the second year of the loan, her mortgage payment is $687, and
the homeowner's association dues are $163, for a total of $850.
On Feb. 21, Lunden became a homeowner for the first time. Since then,
Lunden has met all her neighbors, and a friend bought a condo in the complex.
By now, Lunden's struggles to reach her goal have faded into memory.
"Just a few clicks of a mouse and a few taps on the keyboard of my
computer," she recalled, "and my dreams of home-ownership came
true."