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On the flip side...
Sticking with the housing market, here's the story of a young first-time home buyer. And I mean young. She bought a foreclosed home about a month ago. At age 20.
In fact, Denise Tejada and her 22-year-old brother both bought homes in the San Francisco bay area. Denise is a reporter at Youth Radio, which featured their story:
You gotta like them. Two immigrant kids saving from age 15, working hard, encouraged by their father to be smart with their money. But we wanted to know why they wanted to buy homes, what the process was like and what they're giving up to do this.
This week, I interviewed Denise. You can listen to it below, but here are a few details, some of which aren't in the interview:
Denise works three jobs so she can afford her new house. She makes $2470 a month but pays $1328 to service her mortgage. That means 54% of her income goes to the house, leaving her with $285 a week to live on. Doable, but tight. She's breaking the 30% rule and then some, not to mention she's still spending out of pocket to renovate the yard, fix the roof and paint.
She got a loan to renovate the place, which was just a "box" with no kitchen or bathroom when she bought it. She says the renovation has increased the value of her home from $155,000 to $255,000. In the interview, she describes the process of getting the loan.
She also answers the question, "Do you see this as an investment or a home?" (That's at 6:10)
Denise is clearly intelligent and motivated. She's learning a lot through the experience. And she's already light years ahead of many young people in terms of respecting the money she makes. But so far, she's sacrificed going to college to buy this home. And she's spending an awfully big chunk of her income on it. I hope she doesn't lose one of her jobs.
If she can find a buyer, she might make a nice profit. She'll also collect the first-time home buyer tax credit next April. But is this what young people should be doing? Take a listen. What do you think?
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I am sorry to hear about your troubles. However, in most cases, income correlates with education. "What you earn depends on what you learn", as Clinton put it. I am a first-generation immigrant, and I earn a six-digit salary thanks to my graduate degree obtained in a state university. (Incidentally, I could easily buy Ms. Tejada's house, but I would consider it a very bad investment...)
eh-- Denise said her family is from El Salvador, not Guatemala. This is a hugely controversial decision. You wonder how much influence the father has on the kids, and if they were really making their own decisions or just trying to make him proud. It's hard at age 20 to know what you really want. Maybe it is what she really wanted, or maybe she just didn't know what else was out there. Personally, I don't think there is anything wrong with 20-year-olds using their money to travel the world, take classes that would enrich their lives (whether these were academic or not), or doing something that was important to them and not to their parents. Owning a home really forces someone to stay in one place for a long period of time and cuts off that period of exploration. But, then again, if they have enough money, maybe they will do some of these exploratory things despite owning a house...
So how -- *exactly* -- does one immigrate to the US legally from Guatemala?
And sorry, but in concept the "American Dream" does not include an explicit subsidy from taxpayers. The bare fact here is that such a loan would never be made, e.g. by the private sector, without that.
If all the "American Dream" means today is going heavily into debt in order to own some dump, then things have gone further down the crapper than most of us would've thought. And that's saying something.
To the author and all the feel-good regular PBS/Marketplace people reading this story.
The fact that this is STILL happening shows how we've learned NOTHING from this whole crisis and how our bureaucratic misguided government still has no clue what it's doing or what it's promoting, particularly on the housing front.
The fact that someone got this type of loan on these terms is RIDICULOUS. And to have GOVERNMENT SPONSORED media actually PROMOTING this is even more insane (the Youth.Org piece certainly makes it out like this is something we should ALL be emulating - ok why? Well because we can feel good about poor 2nd generation immigrants buying homes no matter how insane the loan is of coures? Why? WHY???).
This is not and will never be a good loan and it makes no sense that government-funded programs like Marketplace and the youth station should be actively promoting/lauding the practive. In fact, it's preposterous.
While I applaud her work ethic and stick-to-it ness, it's crazy that this is presented in such a biased positive light.
We have learned nothing from this crisis apparently, and I guess the government will from multiple fronts now pressure the FMA and banks into lending at these ridiculous terms and I assume lead us into yet another crisis....
rather than asking how on earth did she get this loan, I'm kind of rooting for her. how many people in her situation have a house to show for their efforts? maybe her work ethic will be enough to carry her through.
after returning to an "affordable" {read: not very good} college for a master's degree and seeing how many middle america kids can't think their way out of a paper bag and what a nice racket college is, I think she's doing well Not to take everyone's advice and go straight to college without a clear purpose of what she wants to do there. so, so, SO many kids going to college are drinking all night and sleeping all day all the while racking up incredible amounts of student loan debt. I would advise my own children to STAY OUT OF COLLEGE until you know What you want to do there and how much that field will pay you back. If that day never comes that they have the motivation to go for a specific reason, then they should STAY OUT.
IT IS TOO MUCH MONEY.
Not a very smart thing to do. Her income is unlikely to increase without an education, and she won't be able to afford college with that much of a mortgage obligation. Nor will she be able to sell the house these days. I see another foreclosure in the making. How did she even get a mortgage with those percentages?
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