Twenty six years ago my new wife, the ever comely Suzanne Hall, and I were middle-aged, had low incomes, had no almost no assets and yet we both dreamed of owning our residence.
All our lives—-I was in my late 30s—-we had lived in rented apartments, but we wanted control of our lives. We wanted to own our home in a city that is, and remains incredibly expensive, New York City. Given that neither of us had great incomes—-I worked as a reporter for a trade publication long since gone called “Financial Services Week”—and Suzanne, a budding playwright and actress, worked as a transcriber.
Given our dreams and resources, our wishes seemed akin to saying that someone wanted to play second base for the New York Yankees, but could not hit a curve ball or turn a double play. And yet here we sit in our dream apartment in Kew Gardens almost three decades later, our mortgage about to be retired some five years early.
Advice on how to accumulate financial assets and basic steps of money management are in the books that my partner, Liam Judge of County Tyrone, and I have written, including our recently published “MoneySense,” as well as our first effort, “Personal Finance for People Who Hate Personal Finance.” By contrast, here I want to provide tips for obtaining a mortgage. These are techniques that Suzanne and I used to get our mortgage. That was a process that was difficult for two people of modest income and with less—-much less—-than $5,000 in assets.
How did we do it?
Did we use some of the hocus pocus tricks that many banks and individuals were using in the 1980s and 1990s and obtain mortgages? These were tricks that finally blew up in 2008, causing a mortgage mess that many Americans, and Western Europeans are still cleaning up after some five years later. Actually, much of what I will tell you here are common-sense ideas. Still, it is obvious that many people—and certainly governments and their reckless central banks—have forgotten common-sense ideas. Here are some tips that allowed Suzanne and me to get a mortgage even though the odds were stacked against us.
*Save, save, save. We got serious a few months into our marriage. Within a year and a half we had saved some ten thousand dollars. Actually we could have saved a lot more if I didn’t hold on to a car that was on its last legs for the first six months of our marriage. I dumped the car—-got $100 for it—and told Suzanne if we bought another car we would never be able to buy an apartment so choose what you wanted. We chose the apartment.
*Go easy on the credit card debt. Both because it reduces the amount you can save and also hurts you in an area that we will soon explore.
*Check your credit report. Be sure there are no outstanding debts against you because they will turn up once the mortgage review process begins.
*Look for help from friends and relatives who you can trust. We borrowed $5,000 each from our wonderful mothers. So now we had double or savings, some $20,000.
*Try to have stability in your employment history. It makes banks think you will be likely to make all your mortgage payments.
*Look for allies and teachers whenever you can find them. More on this soon.
Now we took all these steps and guess what?
We didn’t get the mortgage, at least not initially.
Our income was seen, at the outset, as being not quite adequate. However, the co-op, which wanted to sell units, had a financial officer, Bill, who made our case with the bank. The bank used a formula for evaluating a mortgage—–an applicant’s income and debt levels. Our income was a little lean. But, as Bill pointed out, our debt level was fabulous. We had no car loans or student loans and we paid off our credit cards every month. We had no debt.
The bank, the now long gone Dime Savings Bank of New York, allowed our sterling credit to offset our somewhat low income. After months of waiting, we finally got our mortgage. We moved in around mid-July 1989. We had finally convinced the bank that we were a good risk. That’s more than I can say of the bank, which got taken over by Washington Mutual.
Later, with its sloppy ways, Washington Mutual also went belly up and was taken over by J.P. Morgan Chase. It now holds our mortgage, which was originally some $80,000. The mortgage has less to $3,000 to go and will be retired this year.
In going for a mortgage remember this: Banks are as concerned about how you spend your money—-do you pay them on time, etc. —–and your levels of debt as they are with how much money you make. Lots of people make great incomes and get turned down for mortgages. Yet even people with modest incomes, if they are careful and follow commonsense steps, can look forward to someday getting that dream house or apartment. By the way, we’re now looking to get a bigger apartment or a house because we can afford it and because we have almost no debt.
Good luck. I hope your experience is the same as ours.