Buying a first home has gotten easier

August 13, 1993|By Janet Braunstein | Janet Braunstein,Knight-Ridder News Service

The Christmas after Chuck Meeker bought his first home was a lean one. That night of Dec. 12, when he closed on the condominium in Michigan and moved in, he was flat broke but happy.

Mr. Meeker had used up every cent of his savings to pay the 10 percent down payment on his $42,000, one-bedroom condo in Lafayette Park.

Credit was tight in 1980, and as a single, 30-year-old, first-time buyer, he'd also been required to pay off all his debts -- even his $200 MasterCard bill -- to qualify for a mortgage.

Home ownership is more accessible to singles today, thanks to a variety of factors. Interest rates on mortgages are at their lowest levels in 20 years, with adjustable rate mortgages as low as 4 percent and fixed rate loans at 6 to 7 percent.

Down payment requirements dipped to as low as 5 percent from as high as 20 percent in the 1970s and '80s. Home prices are holding steady. And mortgage lenders put out the welcome mat for single buyers, says Albert King, senior vice president and mortgage manager at First Federal of Michigan.

Same as rent

"Many times they can buy for about the same payment as their rent," Mr. King says of single home buyers. "It's an opportune time to move out to get that first home."

For example, he says, buy a $45,000 home with 10 percent down and the monthly payment would be $303 on a 30-year, 7.125 percent mortgage. Figure less than $200 for taxes and insurance and that's $500 in all -- about what many people pay in rent.

No wonder single people made up one third of first-time buyers and 24 percent of all home buyers in 1991, up from 17 percent in 1987, according to the National Association of Realtors.

"We have a lot of upwardly mobile singles who need to get into a tax shelter. Home ownership is very desirable," says Pat Morgan, vice president and sales manager of Chamberlain Realtors in Royal Oak, Mich.

Home ownership is one of the last major tax shelters, with home owners writing off property taxes and mortgage interest payments as well as some closing costs.

Mr. Meeker's in his second home now -- the house he grew up in, in Grosse Pointe, Mich. -- and he already has refinanced it once to take advantage of falling interest rates. Two years ago, his mother, Dorothy Meeker, decided the three-bedroom, one-bath house built in 1927 was too big and required too much maintenance. Meanwhile, her son, an advertising agency art director, was outgrowing his condo.

She bought a condo in St. Clair Shores, Mich., coincidentally quite similar to her son's Lafayette Park place, and he bought her house.

Even easier the second time

"This time it was easy. When you buy your second home, you're a proven entity. This closing was a breeze," Mr. Meeker said.

And this time, he'd had 10 years to save for a down payment. He even had money left to gut the kitchen and, with the help of a contractor, make it over.

Since then, three of his friends also have bought the houses of parents or grandparents.

Beth Adams was looking for something cheap when she bought her first condo in Royal Oak 15 years ago. She was working in El Al airline's Detroit office, making just $13,000 a year and living in a cramped studio apartment.

But her parents talked her into buying instead of throwing money away on rent, and she found a one-bedroom converted apartment for just $23,000.

"I could just barely afford it. I ate a lot of eggs and a lot of meals with my parents." Seven years later, Ms. Adams, now a marketing manager for a computer company's training division, had changed careers, bought a larger second condo with a backyard and fireplace, and sold the first one for $30,000.

"A lot of my friends are in the same position" as single buyers, "but we all looked at different things," Ms. Adams says. "Some people wanted an attached garage, or a pool. Some couldn't care less about a fireplace but have to have a basement. How much room do you need? Do people come visit you? Do you need a home office?"

What can you afford?

Ms. Adams suggests singles figure out what they can afford first and make sure they can afford the monthly payments right away, not a year from now. "You don't get raises now as easily as you did in the '70s and '80s."

When someone's looking for an expert in helping singles find homes, the National Association of Realtors turns to Claudia Deprez, owner of Florida Singles Real Estate Inc. in Palm Beach.

Ms. Deprez founded her business 20 years ago, when, as an experienced real estate agent but a newly divorced woman in her 20s, she was stunned by the difficulties she faced in buying her own home.

"It gave me an appreciation for what singles were facing. Unarmed, I don't know how I would have gotten there."

She applauds the growing number of singles, particularly women, braving the real estate market.

think it's wonderful," she says, " because they're feeling safe enough, powerful enough and comfortable enough to go out and buy their own home."

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