I am a homeowner. Okay, really I only own about 10% of my home. And when you consider that my husband and I both share that 10% I suppose that I truly only own about 5%. I guess that is about the size of one of the kids' bedroom plus a bathroom - not too bad, I suppose.
I have held this homeowner title for just over 3 years now. And for the most part it's pretty good. We enjoy having a place to ourselves - a place where the walls are not shared with loud neighbors, a place with a backyard for the kids to roam free in, a place that I can paint and repaint and repaint again if I feel so inclined.
As I have told you, my husband and I are both currently gainfully employed. And except for periods of education and one brief foray into full-time commission-only sales for my husband we have been so employed for the entirety of our adult lives. We feel blessed to have found work that sustains us and isn't excrutiatingly painful for our bodies or our minds. And these jobs have allowed us to make our mortgage payment without fail for 36 months so far.
But let me tell you how we got here. Shortly after we were married we decided the time was right to buy a home of our own. I had been going stir-crazy in apartments for several years and was itching to get out and get into someplace I could call "ours." At the time we were ready to apply for mortgages my husband was about 60% through his aforementioned stint in sales. Now many people can make a lot of money in sales. It's a decent living for many folks. But as much as I love my husband and am happy to extol his many virtues to you, salesmanship is not among them. He's just not a natural salesman. He's a nice guy. A nice guy who likes to have direction and structure. Convincing people to buy something that might need and might want just isn't his forte. In other words... he wasn't making a lot of money in the sales world.
The first mortgage lender we met with was not concerned about this fact. I made a good income. And she was glad to inform us that we could just "state" his income. "State" his income? What on earth does that mean? If you haven't read a newspaper in the last 5 years I'll give you the gist - it doesn't matter what you make. You just "state" that you make a certain amount of money - no supporting documentation required. So while his actual income for the year may have been in the 4 digits she was happy to let us state any amount we found reasonable.
Our second problem was that we had no money saved for a downpayment. We might have been better prepared but a sales job requires lots of investment into a salesman's wardrobe (read: suits) and tools (read: laptops). Plus I had only recently finished my Master's degree so I hadn't been back in the working world very long. No matter. They were happy to lend us 100% of the value of the property. We did have a few thousand in savings for an escrow hold and closing costs. But there was even a solution for this non-problem. They would gladly roll the closing costs into the loan amount and let us finance it.
We eventually went to a second lender for comparison. They weren't as keen on stated income but had no issues with 100% financing. And they had one final solution for us to keep our mortgage payment as low as possible - a 40 year loan. 40 years? As in, I'll be at least a decade into retirement before we reach full amortization? Yeppers!
In the end we found a solution with the second lender. A 40-year ARM for 100% of the sale price. We elected to not "state" any incomes and were able to qualify on my income alone. We were smart enough to recognize that we should at least limit what we borrowed to 3x my annual salary.
Our story has a happy ending. One month after closing my husband landed a salaried position in his previous field with a salary approximately equal to mine. In the end loan value was only about 1.8x our combined annual salaries. Very reasonable by almost any standard. And one year after closing we refinanced to a 30 year fixed rate with a small fixed rate 2nd mortgage (no we did not take cash out). Having a 2nd is not ideal but at least we know what we'll be paying next year and the year after that. And we've been fortunate enough to manage to increase our salaries each year making the payment even easier.
And we are working on a plan to be completely debt-free, including our mortgage in the next 15 years.
But not everyone has the same ending. We KNEW we were signing up for a 40 year ARM. And we had a plan to refinance to a fixed rate as soon as possible and wise. Too many others didn't know what they were signing up for. And eventually something in that fine print came to bite them in the rear.
The real question is why did this happen to so many people? I think there are a lot of causes. Lenders, at the behest of Congress and the Community Reinvestment Act of 1977, made it as easy as possible to get into a mortgage. They offered ARMS with low introductory rates. They offered stated income plans. They offered 40 and 50 year loan terms. They offered interest-only loans.
And while I'm sure many of the mortgage brokers and consultants out there are upstanding business people who tried to disclose all the information I'm sure there were others who tried to hide anything unsavory.
And the other reason... people didn't read what they were signing. They were so excited to get into that shiny new (or new-to-them) place with a driveway and a mailbox and a backyard and a playroom for the kids, that they signed without reading.
So while it is certainly an obligation of the lender to disclose pertinent information the truth is that everything was in writing. Everything. All they had to do was read those documents - all 887 (at least it felt like that many) of them.
"But, but.... those documents are so confusing and in such legal-ease how can a person be expected to read them?" you ask. I read them. My husband read them. When we didn't understand something we asked our realtor or our lender to explain. Of course, we have a higher education background. Certainly I am not saying that one must be college educated to own a home. Most certainly not. But I believe one must be aware enough to know their own limitations. Anyone entering into any contract (yes, a mortgage is a contract) should be able to either read and understand the documents themselves or know that their understanding is limited and know to ask someone independent (not the lender who is trying to close the deal) to read and explain it to you in terms you can understand.
In the end, no matter how slimy your lender might be, if you read before signing you would at least know what you are getting into. And you can make an informed choice on whether these are terms you can agree to and maintain. And if they aren't you can walk away until the terms or your situation changes. Making the assumption that your name is not forged on the contract documents, no one gets you into a bad contract without your consent. And so while others may have blame for being less that forthright, we can only control ourselves and our reaction to such people. My reaction to people who I believe are being untruthful is to verify, verify, verify. If I fail to do that and end up with a bad outcome, I have no one to look to but myself.
So tell me... what crazy mortgage variations were you offered? Which did you sign up for?
As an aside... how many congressmen and women do you think actually read all of the stimulus before voting? How many of their aides even read through the whole thing?
Wednesday, February 25, 2009
Monday, February 23, 2009
How to Build a Stimulus
I don't want to talk about the stimulus package passed by Congress and signed into law by our President. What I want to talk about is how I would create a stimulus package if given the chance.
I have an analytic mind. I am results oriented. I have degrees in math and engineering - it's just how my brain works. I understand that most politicians (on both sides of the aisle) are idea people, not numbers people. And quite honestly, I think we need more people who have BOTH skill sets.
If I were to design a package to stimulate the economy here is how I would go about it:
1. Identify & clearly state the goal (i.e. "stimulate the economy in the short and long term")
2. Define the mechanism to achieve the goal (e.g. XX jobs created, $XX salary increases, etc)
3. Determine my budget for the plan.
4. Brainstorm ideas that would achieve each mechanism (e.g. repairing every bridge on every highway might create short-term jobs)
5. Determine actual impacts of the brainstormed ideas (e.g. If we repair every bridge we will need X workers for X number of years. They will need the following list of skills: A, B, C.).
If an idea doesn't actually achieve one of the mechanisms of the goal it gets nixed. That doesn't mean it's not a good idea, just means it doesn't belong here because it doesn't get me closer to my goal.
6. Determine the cost to implement each brainstormed idea that hasn't been eliminated.
***At this point each idea has impact number (X number of jobs) and a cost number ($x,000) ***
7. Assign each idea a value that is a function of cost and impact.
8. Select the final list of ideas based on those with the highest value. Stop putting things on the list when I have reached my allotted budget.
Is this really that hard?
I feel like the current method has been turned on its head. Our elected officials throw out ideas. Someone says "ooh, that's a good one, let's do that" and give little to no consideration to how much it will cost or whether it will actually stimulate the economy.
Now, about the real stimulus bill...
The plan is projected to create 35 million jobs. At a total cost of around $800,000,000,000 that is a cost of almost $23,000 per job. Is that a good investment? I'm not sure yet. But I have to believe that we could have had that same result with a lower price tag.
I have a few other issues with this as well...
Who determined that job projection?
What methodology was used to come up with those numbers? What calculation did they use to determine how many jobs each program on the bill will create?
It frustrates me that if I were to have to come up with a proposal like this to spend my employer's money I would need real, concrete data and verifiable outcomes. There seems to be no such requirement or even an idea that there should be for our elected officials.
I have an analytic mind. I am results oriented. I have degrees in math and engineering - it's just how my brain works. I understand that most politicians (on both sides of the aisle) are idea people, not numbers people. And quite honestly, I think we need more people who have BOTH skill sets.
If I were to design a package to stimulate the economy here is how I would go about it:
1. Identify & clearly state the goal (i.e. "stimulate the economy in the short and long term")
2. Define the mechanism to achieve the goal (e.g. XX jobs created, $XX salary increases, etc)
3. Determine my budget for the plan.
4. Brainstorm ideas that would achieve each mechanism (e.g. repairing every bridge on every highway might create short-term jobs)
5. Determine actual impacts of the brainstormed ideas (e.g. If we repair every bridge we will need X workers for X number of years. They will need the following list of skills: A, B, C.).
If an idea doesn't actually achieve one of the mechanisms of the goal it gets nixed. That doesn't mean it's not a good idea, just means it doesn't belong here because it doesn't get me closer to my goal.
6. Determine the cost to implement each brainstormed idea that hasn't been eliminated.
***At this point each idea has impact number (X number of jobs) and a cost number ($x,000) ***
7. Assign each idea a value that is a function of cost and impact.
8. Select the final list of ideas based on those with the highest value. Stop putting things on the list when I have reached my allotted budget.
Is this really that hard?
I feel like the current method has been turned on its head. Our elected officials throw out ideas. Someone says "ooh, that's a good one, let's do that" and give little to no consideration to how much it will cost or whether it will actually stimulate the economy.
Now, about the real stimulus bill...
The plan is projected to create 35 million jobs. At a total cost of around $800,000,000,000 that is a cost of almost $23,000 per job. Is that a good investment? I'm not sure yet. But I have to believe that we could have had that same result with a lower price tag.
I have a few other issues with this as well...
Who determined that job projection?
What methodology was used to come up with those numbers? What calculation did they use to determine how many jobs each program on the bill will create?
It frustrates me that if I were to have to come up with a proposal like this to spend my employer's money I would need real, concrete data and verifiable outcomes. There seems to be no such requirement or even an idea that there should be for our elected officials.
Voice
I have found there to be a dearth of young, female, conservative voices out there in today's media. I have no illusions of becoming the "voice of a generat
ion" or any other such nonsense. But I find myself more and more often having strong opinions on the topics of the day. Putting my words here will help me to better formulate my ideas. And maybe, just maybe give someone else something to think about.
As we go forward I will be candid in my opinions. I will do all I can to be respectful of those who disagree with me. I expect the same kind of response. And just to be safe, all comments will be moderated.
About me:
* I am young - just 33 years old. That makes me the tail-end of Generation X. And looking at the profile of a Gen-Xer and a Gen-Yer I am an appropriate mix of the two with my natural tendencies leaning toward the Gen-X description.
* I am conservative. Yes, I am a registered republican. But more importantly than that, I am conservative. I believe in the power of the individual, the empowerment of self-sufficiency and the careful weighing of options before acting
* I am a mother. I have two young children (currently both under 2 years old) and I view the world through a lens of what the impact will be for these precious children when they are adults.
* I am a Christian. I practice my Christian faith in the Catholic church. Biblical teachings impact all of my views and I prefer to prayerfully consider my decisions in all things. You can decide for yourself if I am a de-facto member of the *gasp* "religious right." It's not a label I would apply to myself but maybe you would.
* I do not work in politics in any way, shape, or form. Maybe someday that will change and I will find myself working in the public sector but not currently.
* I have a full-time, paid position outside the home. My children go to daycare. My husband and I balance working, spending quality and quantity time with our children and having a relationship with one another. It's not always easy but each piece is important.
* I am educated. I hold both a Bachelor's degree (in a science field) and a Master's degree (in an engineering field) from top nationally-ranked universities. I graduated from undergrad cum laud.
* I am surrounded by a family of married couples. I have parents who are still married to one another after 43 years. And in-laws who have been married for 40 years. And siblings and sibling-in-laws who have been married for 19, 14 and 10 years. I believe in marriage.
* Like so many others in America, I have debt. Mortgage debt, student loan debt and credit card debt. We are working on becoming debt-free in the next few years.
* I met my husband after college. We did not grow up together or attend school together. We did not meet on-line or in a bar. Just the old-fashioned way - by happenstance.
* My husband and I are both college-educated professionals with more than 10 years in the workforce. And our compensation is commensurate with that background.
* I live in the suburbs of a major US city.
If there's anything else you'd like to know about me, ask. I know that understanding the background of an author (even a blog author) helps give context to their writings. If what you want to know isn't too personal, I'll be happy to share.
Now.... Let's chat.
ion" or any other such nonsense. But I find myself more and more often having strong opinions on the topics of the day. Putting my words here will help me to better formulate my ideas. And maybe, just maybe give someone else something to think about.As we go forward I will be candid in my opinions. I will do all I can to be respectful of those who disagree with me. I expect the same kind of response. And just to be safe, all comments will be moderated.
About me:
* I am young - just 33 years old. That makes me the tail-end of Generation X. And looking at the profile of a Gen-Xer and a Gen-Yer I am an appropriate mix of the two with my natural tendencies leaning toward the Gen-X description.
* I am conservative. Yes, I am a registered republican. But more importantly than that, I am conservative. I believe in the power of the individual, the empowerment of self-sufficiency and the careful weighing of options before acting
* I am a mother. I have two young children (currently both under 2 years old) and I view the world through a lens of what the impact will be for these precious children when they are adults.
* I am a Christian. I practice my Christian faith in the Catholic church. Biblical teachings impact all of my views and I prefer to prayerfully consider my decisions in all things. You can decide for yourself if I am a de-facto member of the *gasp* "religious right." It's not a label I would apply to myself but maybe you would.
* I do not work in politics in any way, shape, or form. Maybe someday that will change and I will find myself working in the public sector but not currently.
* I have a full-time, paid position outside the home. My children go to daycare. My husband and I balance working, spending quality and quantity time with our children and having a relationship with one another. It's not always easy but each piece is important.
* I am educated. I hold both a Bachelor's degree (in a science field) and a Master's degree (in an engineering field) from top nationally-ranked universities. I graduated from undergrad cum laud.
* I am surrounded by a family of married couples. I have parents who are still married to one another after 43 years. And in-laws who have been married for 40 years. And siblings and sibling-in-laws who have been married for 19, 14 and 10 years. I believe in marriage.
* Like so many others in America, I have debt. Mortgage debt, student loan debt and credit card debt. We are working on becoming debt-free in the next few years.
* I met my husband after college. We did not grow up together or attend school together. We did not meet on-line or in a bar. Just the old-fashioned way - by happenstance.
* My husband and I are both college-educated professionals with more than 10 years in the workforce. And our compensation is commensurate with that background.
* I live in the suburbs of a major US city.
If there's anything else you'd like to know about me, ask. I know that understanding the background of an author (even a blog author) helps give context to their writings. If what you want to know isn't too personal, I'll be happy to share.
Now.... Let's chat.
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