That $8 a day Starbucks habit could translate into a big chunk of a down payment to buy your own home.

In a year’s time $8 five days a week adds up to $2,080. That’s almost a third of the 3.5 percent down payment needed to buy a home valued at $180,000 using a FHA loan.

Mortgage consultant Deborah Romero of Ripon-based Ability Mortgage often uses such an example when counseling prospective first-time home buyers.

It’s not that Romero has anything against Starbucks or how people spend their money. It’s just that getting into a home of your own may not be as difficult as people often think.

“The problem is we all want things now,” Romero said. “We aren’t a nation of savers.”

By having someone look over your financial situation and determine what it takes to get you into a home, a buyer can overcome the pitfalls of not being a saver.

“Very few people realize how much an $8 a day Starbucks habit costs them,” Romero said. “Often times, people just need to go on a debt diet.”
It could be something as simple as paying off a credit card balance in six months to improve a credit score. Or it could involve securing a gift from parents or tapping into a 401K for a loan to yourself to buy a home.

With home prices rising and mortgage interests inching up, the door is starting to close ever so slowly on the ability of those who live and work in the 209 to be able to buy a home in San Joaquin or Stanislaus counties or at the very least is reducing the amount of home they can afford to buy.

It is why Romero believes anyone who has ever thought about buying a home of their own should contact a mortgage consultant to see where they stand financially, what they need to do to improve their credit, and how they can come up with the down payment. It doesn’t cost anything nor does it obligate the potential home buyer. What it does, though, is arm them with knowledge by giving them a clearer picture of the path they have to travel to become a homeowner.

“A lot of people make the mistake of checking the Internet to do their research about home loans,” Romero said. “There is a lot of good information on the Internet and there is a lot of bad information. A website mortgage calculator usually only touches on principal and interest. They don’t include mortgage insurance, homeowners insurance, and taxes.”

Another drawback of the Internet: Websites only ask you specific questions. They don’t ask questions based on an individual’s financial situation but instead use broad templates.

Romero also noted it makes more sense to see a loan officer first before contacting a real estate agent.

“It makes no sense to get your hopes up,” Romero said. “A real estate agent can show you a lot of homes you might fall in love with but if you can’t afford them it is just getting your hopes up.”

By going to a mortgage consultant first, buyers can find out not only what they need to do to be able to position themselves to buy a home but they can also find out how much home they can afford.

Why buying

makes sense

Naysayers during the housing collapse that fed the Great Recession proclaimed that buying a home would never again be a wise investment. People, they contended, were better off renting and putting their money into stocks.

Besides the fact you can’t live in a stock portfolio, skyrocketing rents in recent years has made it less expensive in a growing number of cases for people to buy versus renting.

Romero has a number of clients who bought homes as prices were stumbling after the housing bubble burst in 2006 that are reaping the benefits today by buying a larger home.

Romero noted they bought conservatively by getting smaller homes. And when they built up equity they were able to use that to get larger homes without a significant change in their monthly housing payment.

She also has other clients who are “still underwater” meaning the value of their home is less than what they are owed. But at the same time they can handle the housing payments with ease.

“Equity isn’t real money until you go to sell,” Romero said.

By the same token, whatever you are underwater in terms of your home’s value isn’t real money either unless you go to sell.

“Housing is cyclical,” Romero said. “It has ups and downs.”

As such equity goes and comes.

People often put too much psychological fear in being underwater. Buy a new car, for example, and it drops in value significantly when you drive off the lot. Yet the fact the buyer in most cases owes more on the car than it is worth right off the bat doesn’t put them in a mindset that it was a financially bad decision.

Romero says she encourages buyers to think of buying a home “as renting from yourself.” In the vast majority of cases they get the money back they paid in when they sell and often have equity to pocket or apply to another home.

She can also point to clients who bought in 2008 and who have no intention of selling in the next 10 to 20 years who are already paying less net for housing costs than they were renting six years ago once all costs and advantages are factored into the equation including a reduction of income tax liability.

Romero can be contacted by emailing dromero@abilitymortgage.com or calling 209.825.9383.