‘Saving’ grace

Potential buyers need to assess saving,
spending habits before going after dream home

By Eric Czarnik
C & G Staff Writer

The “For Sale” signs beckon from metro Detroit’s lawns. But for the home shopper who doesn’t want to become a foreclosure statistic, figuring out how to wisely save for and pay for a home can be daunting.

Walter Baczkowski, CEO of the Metropolitan Consolidated Association of Realtors, said home sellers have cut their asking prices, thereby creating a buyer’s market.

“In my opinion, there has never been the kind of market that we’ve had right now,” he said. “If I had extra money right now, I’d be buying several different properties.”

According to the Office of Federal Housing Enterprise Oversight’s recent home price index — showing data for the fourth quarter 2007 — prices in the Warren, Troy and Farmington Hills areas dropped 6.73 percent over the previous year.

But to avoid financial pitfalls, experts agreed that buyers should first honestly assess their saving and spending habits.

According to Baczkowski, aspiring homeowners should try to save enough money to pay at least 10 percent down on the purchase price if possible. In addition, buyers should also set aside several thousand dollars more for mortgage fees, title insurance and other closing costs. To find out exactly how much, they should talk to their Realtors and lenders, he said.

While figuring out their dream home’s affordability, wise shoppers will keep some breathing room in their budgets for things like auto payments, insurance and repairs, Baczkowski said.

“You shouldn’t be at a point where every spare dollar has now gone out, so you can’t go out on Friday night,” he said.

Spending the time to put money aside can be a safeguard against foreclosure, said agent Harvey Volckaert of Lee Realty Suburban in Roseville. But he added that even the most perfect of homebuyers can be vulnerable to losing their house if an unexpected layoff or divorce comes along.

His best saving and buying advice echoed Baczkowski’s: Be prudent.

“Most buyers would buy a house, and they would sometimes buy based on the husband’s (and) wife’s paycheck instead of just the husband’s,” Volckaert said. “Just don’t buy quite to the max. Buy something that might be more affordable.”

Ronna Feldman, manager of Max Broock Realtors of Bloomfield Hills, said first-time buyers must get organized.

“They have to structure a savings plan and be diligent in putting away that amount of money from their paycheck in a designated fund for their down payment and their taxes and their insurance,” she said.

Also, buyers should make sure that their home payments would continue to be affordable by not exceeding 30-35 percent of their gross incomes.

While lenders have lately been stingier with mortgage qualification standards in the wake of the subprime mortgage meltdown, Feldman and Baczkowski said lots of different plans still exist. To get more favorable mortgage rates and loans, they said it’s important to check credit scores and pay down substantial debts.

And the two agreed that sitting down with a Realtor is the best way to discuss the issues.

“Your Realtor is not just someone to drive you around and show you property,” Baczkowski said. “Your Realtor should be your trusted adviser.”

You can reach Staff Writer Eric Czarnik at eczarnik@candgnews.com or at (586) 498-1058.