Be smart about getting the funds for a down payment
Q. I want to buy my first home but don’t have enough money for a down payment. I went to a real estate seminar last weekend where the speaker offered me and everyone else cash to make a down payment if we got a “title loan” on our cars from him. This sounds like a pretty good plan, but what do you think about it?
A. Frankly, I hate it. I have heard some crazy ideas to “help” buyers make their first-home purchase or rental-property investment over the years, but never one that involved the buyer pledging their own car as collateral.
The Federal Trade Commission warns that most car-title loans, sometimes called “pink slip” loans, usually last for only 15 or 30 days. They often carry annual interest rates of 100 percent and sometimes even more than 300 percent.
The loans can usually be renewed or rolled over for additional time. By charging such exorbitant rates, most lenders are happy to do so.
Of course, if you can’t get an extension or are unable to make the sky-high payments, the lender can exercise its right to seize your vehicle and likely will auction it off to repay the debt. You’d then have to find an alternative way to get to work, do your shopping, visit loved ones and the like.
You would probably default on your home mortgage, too, losing the property to foreclosure — perhaps to the same lender who gave you the car-title loan to make the original down payment on the house. You wouldn’t even be able to live in your car because it was already repossessed.
If you’re in such dire financial shape that you’re even considering getting a high-risk car-title loan to raise a down payment, it’s a telltale sign that you probably aren’t ready to buy a home or rental property yet.
Focus instead on saving enough cash to make a traditional down payment while also building up your credit score.
Also remember that various state and federal agencies operate home-loan programs that require relatively small down payments and reasonable repayment terms.
For example, the U.S. Department of Housing and Urban Development’s Federal
Housing Administration offers low-rate loans with a down payment as small as 3 percent, while current and past members of the military may qualify for a mortgage guaranteed by the U.S. Department of Veterans Affairs that requires no down payment at all.
Q. Was Abraham Lincoln really born in a log cabin?
A. Yes, on Feb. 12, 1809, but the oneroom cabin he shared with his parents for the first two years of his life was in Kentucky, not the state of Illinois that later adopted “Land of Lincoln” as its state motto because that’s where our 16th president first ran for office and was later buried after he was assassinated in 1865.
Q. What type of wood do developers and home remodelers use when framing a new home or building an addition?
A. The wood that developers or remodeling contractors use for framing — the skeleton of a new house or addition — is influenced by a variety of factors. They include the availability of local lumber, the climate where the property is located and, of course, the cost of the wood itself.
Though advances in wood technology are making it easier to safely build higher ceilings or bigger rooms without a support beam, the most dominant material in a typical home’s framing is still ol’ fashion “sawn” lumber — two-by-fours, two-by-sixes and the like that are milled from softwoods such as fir, spruce and pine. The wood is relatively cheap, but it is kiln-dried to add to its strength and durability.
Your question leads nicely into a couple of other queries I have received over the past few months, prompted by a series of popular TV commercials for a big insurance company: “How much wood could a woodchuck chuck if a woodchuck could chuck wood?”
The fact is, woodchucks are groundhogs. That means that they don’t throw, or “chuck,” wood. They don’t eat wood, either, but the question has gnawed at some folks since Robert Hobart Davis posed it in a song for a poorly reviewed Broadway musical in 1902.
Of course, if a woodchuck could chuck wood, the daily results would depend on the size and strength of the glorified gopher. They would also rely on the individual woodchuck’s work ethic: Like people, some are willing to labor harder than others.
Setting such issues aside, wildlife expert Richard Thomas from New York notes that a woodchuck chucks about 35 cubic feet of dirt when digging a burrow for a new home.
That means that an average-sized woodchuck could toss about 700 pounds of wood in the same amount of time, which is roughly the amount of lumber needed to frame a midsize closet.
ABOUT LIVING TRUSTS Even low- and middle-income homeowners can now reap the same benefits that creating an inexpensive trust once provided only to the wealthiest families. For a copy of David Myers’ “Straight Talk About Living Trusts” booklet, send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231. Net proceeds will be donated to the American Red Cross.