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20% Down and Things Start Looking Up
by Annie Christian - Special to the Sparks Tribune
Sep 23, 2011 | 936 views | 0 0 comments | 16 16 recommendations | email to a friend | print
Annie Christian
Annie Christian
The new American Dream is dreaming within our means. This doesn’t necessarily mean giving up on the life you desire. But as we’ve learned in the past few years, a big financial dream minus common sense can equal hardship.

During the last few years, homeowners have been losing their homes at record speed. One of the reasons is that they have little or no equity in their home; therefore they have no equity to re-finance their home at a lower interest rate.

Here are some true stories from the other end of the spectrum, of homeowners who saved up for a down payment and walked into home ownership with equity.

Janelle’s American Dream

Janelle has been teaching special education for over 10 years. When the rent on her two bedroom townhome neared $1100 Janelle began to wonder if it would be cheaper to buy instead of rent. She wanted to buy a house with 20 percent down to avoid the monthly mortgage insurance. She found that buying a home with a small down payment is very much like buying an insurance policy with a small deductible; it just makes the monthly payment higher.

Janelle aimed to keep her payment low and set aside a budget for making home improvements. After meeting with a financial advisor, she decided on a very safe game plan to invest money in a short-term bond fund that would yield approximately 6 percent over the next three years. Her total savings at the end of three years came to over $22,000 with no penalty to withdraw the entire lump sum. Janelle bought a gorgeous three bedroom cottage with a large yard putting 20 percent down. Her monthly payment every month for the next 30 years is just $600! Janelle understands the value of realizing an American Dream within your means.

Investing in his Family’s Future

Roberto lost his home over five years ago in a short sale. He had purchased a brand new home when he and his wife were both bringing home full-time incomes. When his wife was laid off a year later, the financial burden of supporting a family of six forced them to give up the house. He learned the lesson early that buying a home with a 100 percent loan and having no equity was not something he wanted to repeat. So, he turned to his bank and started investing money into a CD, a very conservative savings vehicle that you must hold to maturity. At maturity you may withdraw it at no penalty. Roberto opened a CD that involves no risk to his principal investment and will yield approximately 1 percent over the next 35 months. Roberto also regularly saves $350 a month. He projects to soon accrue approximately $12,375 for a down payment on a purchase in the older Sparks area. That will make his down payment $550.

Disney Dreams and Downsizing

Ben and Jenny purchased their five bedroom Wingfield Springs home with no money down and had to take out a second loan so they could qualify for the large sale price. When hard times hit, the couple short sold their home and filed for bankruptcy. Keeping their home would have meant overpaying the bank by $750,000 for it. They also filed personal bankruptcy so they could start over with a clean financial slate.

After consulting with their accountant, Ben and Jenny decided against buying anything on credit for the next three years, including their annual trip to Disneyland. They learned that they could easily put aside $700 each month without suffering a loss of quality of life for the entire family. So, for the next three years they invested that $700 in a single stock and took some measured risk. That one stock yielded them 10.95 percent over the next 36 months. When it came time to cash out the stock for $27,000 and use it as a 20 percent down payment on a smaller home, it set their monthly payment at $900 for the next 30 years. Ben and Jenny are able to take family vacations again to the happiest place on earth!

Are you willing to dream a new American Dream like these families? These homeowners were once burned by paying too much for and ultimately losing their homes. When the dust settled, they dared to make financial sacrifices, save up and gained the security that comes with having equity in your home. A new affordable lifestyle without carrying the financial burden — this is the new American Dream!

Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is
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20% Down and Things Start Looking Up by Annie Christian - Special to the Sparks Tribune

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