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OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®



This article was published on: 06/01/2006

FEATURE: Great Partnerships

BY BARBARA BALLINGER

Finding the American Dream

For some people, the dream of owning a home seems beyond reach. Whether their problem is bad credit, minimal savings, lack of access to flexible mortgage products, or unrealistic expectations, these potential home owners often don’t know the steps that’ll put them on the path to ownership. Fortunately, there are real estate salespeople out there who don’t understand the words “can’t do.” They’re helping turn dreams into reality despite tough odds. In celebration of National Homeownership Month, we salute them and the buyers they’ve helped, partners who truly understand the meaning of home, sweet home.

The Story of Maria Gonzalez and Jorge Villa

Untitled Document
Home owners Maria Gonzalez and Jorge Villa
(two children, 7 and 11)
Broker-salesperson Luther Sanchez,
RE/MAX Online, Quality Service Certified, Downey, Calif.
Where Hesperia, Calif.
Obstacles Bad credit, looking in too expensive an area
What they spent $250,000
What they got 10-year-old ranch, three bedrooms, three-car garage, big yard

In moving to the United States from Mexico, Maria Gonzalez and her husband Jorge Villa wanted a part of the American dream. Four loan officers told them they wouldn’t qualify for a loan. One even suggested they relocate from California to Texas, where housing was more affordable.

But broker Luther Sanchez, referred to the couple by a prior client, knew he could help them if they were flexible. He urged them to consider Hesperia, a fast-growing city in San Bernardino’s high-desert area, because it offered more house for their money than in Downey, where they had rented. “Because Jorge traveled in his truck, I didn’t think moving 30 to 45 minutes away would pose a problem,” says Sanchez.

Sanchez was wise to think of Hesperia for other reasons. “A lot of salespeople won’t drive there because of the distance and lower commissions, and a lot of salespeople in Hesperia don’t speak Spanish, which I do,” says Sanchez. His own parents emigrated from Mexico, which helps him understand the special needs of immigrants, including the fact that they may take longer to make decisions. “They want to understand all the costs, taxes, and deductions,” he says.

Gonzalez and Villa had been looking for a year before they hooked up with Sanchez. Within a month, he helped them find a three-bedroom house in their price range that they loved. Sanchez helped them secure a 30-year conventional mortgage and 100 percent financing from a bank that counted Villa’s auxiliary income constructing cabinets. They moved last May, and Villa now works in construction closer to home. The couple is thrilled. “They especially love the big backyard where their kids play and make as much noise as they want,” explains Sanchez. “And they no longer feel they’re throwing away money on rent.”

The Story of Jen and Tony Kimmen

Untitled Document
Home owners Jen and Tony Kimmen
(two daughters, 2 and 11)
Broker-salesperson Cathy Gjermo, Newcastle Properties Inc., Hastings, Minn., St. Paul suburb
Where Hastings, Minn.
Obstacles Meager savings, bad credit
What they spent $192,750
What they got Four-bedroom, two-bathroom, split-entry

After moving from their parents’ homes when they were 18 years old, Jen and Tony Kimmen worked hard to get by. But the birth of their two daughters and their modest salaries — she’s a utility analyst and he’s a cable line splicer — led to a history of bad credit. “Nobody tells you when you’re 18 how important good credit is,” Jen says.

Last year, when they embarked on their home search, several lenders turned them down for a loan and advised them first to improve their credit. But salesperson Cathy Gjermo recognized their passion and helped them tweak their dream. They’d wanted a new home; she urged them to look at older, less expensive houses that required sweat equity. “She told us we were living in ‘la-la land,’” says Jen.

When the price of a 1974 split-entry house they had seen dropped from $215,000 to $195,000, the couple went back with Gjermo to look. With her clients’ keen interest, Gjermo compiled a list of repairs that needed to be done and their costs and helped the Kimmens set an offer at $182,000. Because of her prior career as a mechanical engineer, Gjermo knew to use facts and figures to make her case.

She printed out a spreadsheet documenting the required work and showed it to the sellers and their agent. She also asked the sellers to pay the closing costs. In the meantime, she had the couple qualified for a conventional, fixed-rate 80/20 loan in case a deal was struck. Counteroffers went back and forth, and the sellers agreed to a sales price of $192,750 and a fast closing — within three weeks.

Although the buyers and Gjermo were nervous that the sellers, an older couple retiring to northern Minnesota, resented the lower price, nothing was further from the truth. At the closing, the couple explained they had raised six children in the house and were delighted kids again would live there.

By the end of the closing, a few days before Christmas, everyone clapped and bawled, recalls Gjermo, who left her clients with an important message: “Although the house needs work, don’t rush to do it all overnight. First improve your credit.”

The Kimmens agree. “We’re thrilled with everything and feel we’ve made it,” says Jen.

The Story of Tralina Mason

Untitled Document
Home owners Tralina Mason
(two children, 2 and 5)
Broker-salesperson Rita Hutson, CRS ®, associate broker, Metro Brokers GMA, Stockbridge, Ga., 20 minutes from downtown Atlanta
Where Stockbridge, Ga.
Obstacles Chapter 13 bankruptcy, no down payment, bad credit
What they spent $112,000
What they got 12-year-old, three-bedroom, two-bathroom ranch with fenced yard

With a Chapter 13 bankruptcy on her financial history and no savings, Tralina Mason, 23, never thought she’d be able to buy a house. But an increase in her rent and a desire for her son and daughter to have separate bedrooms pushed the single mom to try every avenue.

Help came from Rita Hutson, who had become used to overcoming such challenges during her 25 years in the business. “My first clients went to 15 salespeople, and nobody was willing to give them a chance. I got them a loan, and they’ve sent other clients to me. I never give up,” she says.

And Hutson knew just where to turn. She introduced Mason to loan officer Nathan Moore, owner of Metro Atlanta Mortgage Co. Inc. in McDonough, Ga., who also was experienced in helping first-time home owners with a bankruptcy history and no resources to make a down payment. Moore, in fact, was optimistic. “[Mason] had a good job as a mail carrier for the government,” he said.

He took the approval process to the next level, seeking the bankruptcy trustee’s approval for Mason’s 30-year, fixed-rate FHA loan. “The FHA actually considers Chapter 13 as positive credit, as long as the borrower has been making monthly payments for at least one-and-a-half years,” Moore says.

Once Hutson and Mason thought a loan was forthcoming, they started their search for a house with a mortgage payment under $800 a month. They found a three-bedroom ranch in good condition with a yard where Mason’s children could play and which also had a fireplace in its great room, a den, eat-in kitchen, and community lake and beach.

Mason is thrilled about her new home. “I know I have to pay for everything, but I’m excited to paint and decorate to make it comfortable,” she says. Her children may be even happier. “They’re excited to have their own rooms with big closets. My daughter is especially excited to be able to hide from her brother,” she says.

The Story of Janelle Keller

Untitled Document
Home owners Janelle Keller
(one college-age son)
Broker-salesperson Susan Bluestein,
Realty Executives Unlimited, Charlotte, N.C.
Where Charlotte, N.C.
Obstacles No savings, bad credit, top sales price of less than $120,000
What they spent $118,000
What they got Three-bedroom, two-bathroom bungalow

Janelle Keller, 43, never thought she’d be able to buy a single-family home. Raising her son on her own from the age of 22 — and relocating three times for better jobs — she was content with renting. Until she had an epiphany.

“One day, I suddenly added up what I had spent in just the last four years and thought, oh, my gosh, I can’t believe I threw away all that money,” says Keller, an analyst for a business-process outsourcing company. A spiritual person, she prayed to be able to afford a house. She also shared her dream with two favorite baristas at a local Starbucks, and they mentioned that their mother, Susan Bluestein, was a broker.

Bluestein turned out to be Keller’s angel. She was unconcerned that Keller’s top price was $120,000 and was confident that Keller’s long work history would impress a loan officer.

Bluestein helped Keller obtain preapproval, then helped her find a house that stole her heart. “It was the most beautiful home I’d ever seen. It has a gorgeous kitchen, landscaping, fenced yard with a deck, and wonderful front porch,” says Keller, whose son is away at college.

When her approval for a 100 percent 2/28 mortgage fell through due to an old tax lien, Bluestein found another lender who approved her for an 85 percent first mortgage, with the seller taking a 15 percent second, rescheduled the closing, and convinced the seller to pay closing costs.

Bluestein modestly attributes the successful outcome to everyone pulling together. But Keller credits her real estate practitioner with the happy ending. “She made this happen by being diligent, professional, and knowledgeable at every turn, and there were a lot of turns,” says Keller, who moved in last December. “Every time I drive up to my house I feel blessed. Susan will live forever in my heart.”

The Story of Anne and Robert Lassiter

Untitled Document
Home owners Anne and Robert Lassiter
Broker-salesperson Marie Dinsmore, RE/MAX Professional, Duluth, Ga.
Where Roswell, Ga.
Obstacles Bad credit due to family crisis
What they spent $190,000
What they got Three-bedroom, two-bathroom cottage, basement, big yard with trees

After a family crisis destroyed their “perfect” life and credit, Anne and Robert Lassiter were eager to relocate from Florida back to Georgia where they grew up. They responded to a newspaper advertisement for a lease-to-purchase. The investor who owned the property was looking to cover monthly costs and help credit-challenged people eventually buy their own homes. Making a killing was not his incentive.

The catch was that the Lassiters had to put down $5,000 up front and pay their $1,400 monthly rent on time to get back the $5,000 and assume the mortgage. The couple jumped at the opportunity, and after a year of faithfully paying rent, they were ready to close on a three-bedroom ranch with a sales price of $190,000.

The idea for the partnership came from salesperson Marie Dinsmore. After the terrorist attacks on Sept. 11, 2001, Dinsmore found that the investors she knew were unable to lease or sell their properties because of the skittish housing market. A dream one night inspired her to suggest to the investors that they refocus their efforts to help those who were struggling to buy. Through her church she found investors who liked the idea. Today she works with 31 investors, helping them find renters and helping the renters understand how to repair their credit. Of the 42 transactions she’s worked on since the attacks, only one hasn’t materialized.

“It’s a win-win for everyone,” Dinsmore says. The Lassiters agree. “It turned out to be good for us and a good investment,” Anne says. She and her husband are enjoying their new life with new jobs and family close by. Anne has taken the test to become a real estate salesperson; Robert works as an emergency room technician. “We’re appreciative we could own again,” Anne says.

Sidebar: Getting that white picket fence — and more

Single women may be the fastest-growing group of home owners, but it takes a lot of scrimping and saving for them to grab that brass key. The average woman still makes 79 cents to every man’s $1 and is more likely to face credit problems, particularly after a divorce, says Laurence H. Michelson, who owns a mortgage and real estate company, Granite Lending and Granite Home Realty in Woodland Hills, Calif. He recently coauthored a book to help readers overcome the odds, Getting the White Picket Fence without a Man.

The biggest hurdles are a low credit score — below 580 is a red flag to lenders — and a combined current debt that exceeds 41 percent of a borrower’s gross monthly income, says Nathan Moore, owner of Metro Atlanta Mortgage Company Inc. in McDonough, Ga. Yet, these numbers can be offset by the right mortgage product, he says.

One favorite for high-risk borrowers is a “Band-Aid” 2/28 loan that offers a fixed rate for the first two years, then adjusts the rate for the remaining 28 years — downward if an applicant’s credit improves, and the loan can be refinanced at a lower rate. Currently this loan tends to run 7.25 percent or 6.875 percent rather than 6 percent, says Michelson. But one caveat, says Moore, is that some of these loans carry a stiff prepayment penalty of six months’ interest if they’re paid off before two years.

Another popular product for credit-challenged borrowers is an adjustable rate mortgage that adjusts every three years. Two caveats should be considered, says Moore: Borrowers may not be eligible for a lower rate if the market moves down during the fixed portion of their loan term, and if rates go higher when they are eligible, refinancing may not be a viable option.

When traditional banks won’t offer a mortgage, borrowers can also consider going to a mortgage banker who handles subprime loans, generally priced higher because the borrower’s history adds risk to the loan. Some of these also carry a prepayment penalty, says Moore. Some mortgage bankers are also now offering 40-year amortization or interest-only loans rather than the more traditional 30-year loans. These make minimum monthly payments more affordable, but they carry the risk that borrowers may never pay the principal. “If they sell in a few years, there’s no guarantee they’ll enjoy increased equity,” he says.

Government loan programs are another option. A loan insured by the FHA, which has a higher tolerance for limited credit and past credit problems, requires a low 3 percent down payment, says Moore. Moreover, many borrowers are eligible for a gift for their down payment if they buy from sellers who participate in a nonprofit down payment assistance program, he says. The sales price of the house has to be under a certain dollar amount, which varies by location. Currently in metropolitan Atlanta, for example, a loan can’t exceed $227,000, he says. Also, part of the payment includes mortgage insurance throughout the loan’s life. The Web site www.getdownpayment.com also provides valuable information on down payment assistance from The Nehemiah Program.

Moore advises high-risk borrowers to order copies of their credit reports to be sure there are no mistakes. If there are, he suggests getting them corrected immediately. He also recommends getting credit card balances to zero, if possible, to qualify for the lowest financing terms. For more information on your credit reports, visit www.annualcreditreport.com or call 877/322-8228. Buyers can request a report by phone by providing their name, address, Social Security number, and which credit report they want. Buyers can also contact any of the credit bureaus through their Web sites — www.equifax.com,www.experian.com,or www.transunion.com — for one free annual credit report, which they can have sent to them by mail.



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