Oct252013

Mortgage fire is realization of American Dream

According to Wikipedia

The American Dream is a national ethos of the United States, a set of ideals in which freedom includes the opportunity for prosperity and success, and an upward social mobility achieved through hard work. In the definition of the American Dream by James Truslow Adams in 1931, “life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement” regardless of social class or circumstances of birth.

The idea of the American Dream is rooted in the United States Declaration of Independence which proclaims that “all men are created equal” and that they are “endowed by their Creator with certain inalienable Rights” including “Life, Liberty and the pursuit of Happiness.

The American Dream became perverted during the housing bubble. Americans began to define themselves by the size of their house. Wealth became confused with debt. Appreciation became confused with income. Credit became confused with savings. Rather than viewing the road to prosperity as one that required hard work, Americans came to believe they could have success by simply purchasing the right house and living off the increase in its value. No work, experience, or expertise was required.

These perverted views of what it means to be American are so engrained in the collective consciousness of Californians, that few remember the real American Dream.

Work hard, save money, pay off a mortgage, and live in your debt-free house on the investment income from your savings in your golden years.

A few people still get it, and today I want to celebrate their victory.

Family achieves dream with mortgage fire

The Cortez family of Escondido are the first San Diego County family to pay off their Habitat for Humanity home

By Pam Kragen — 4:35 p.m.Oct. 21, 2013

Lori Holt Pfeiler, executive director of San Diego Habitat for Humanity, lights the mortgage papers paid off by Jose and Irma Cortez of Escondido, center, at the organization’s 25th anniversary picnic in Escondido on Oct. 19. Joining in the celebration were the Cortezes’ children Jose Jr., left, and Eber. — Jamie Scott Lytle / U-T

 

ESCONDIDO — With a whoosh of flame, a burst of confetti and a round of applause, Escondido homeowners Jose and Irma Cortez made good on a promise they made to each other, and to San Diego Habitat for Humanity, 17 years ago.

The Cortezes are the first family in San Diego County to pay off their zero-interest mortgage with the nonprofit housing charity. They celebrated their achievement Saturday afternoon with a ceremonial mortgage-burning at Habitat’s 25th anniversary picnic in Escondido. The Cortezes paid off their loan three years early, Jose said, because they wanted that money to be used by Habitat to help other needy families.

“Having our own home changed our lives,” he said. “It was like a miracle, a blessing from God. It gave our family the room we needed and the payments were low enough that we could give our children a much better future.”

When the Cortezes applied for the program in 1996, they were living in a two-bedroom, one-bath Escondido apartment with their five children and Jose’s mother, who took care of the kids while they both worked. They were perfect candidates for the Habitat program, which promotes itself by offering qualified homebuyers “a hand-up, not a handout.”

Some people may decry that this family was given such a break, but this was not a handout. Six low-income people living in a two-bedroom apartment are not likely going to save 3% or more for a down payment, and at San Diego prices, the chances of these people getting on the property ladder were low. Yes, there were given a great opportunity, but what’s more important is what they did with it. They obviously made the most of it. I admire that.

“We don’t give away homes. We make homes affordable for working families,” said Lori Holt Pfeiler, executive director of the San Diego affiliate of the faith-based Atlanta charity, whose volunteers have built and rehabbed more than 600,000 homes worldwide for needy clients.

Since its creation in 1988, the San Diego program has provided 187 homes to families who meet need, income and credit requirements and are willing to put in at least 500 volunteer hours.

There is no free lunch. These people have to work hard to get this chance.

Habitat builds homes for about $250,000 and sells them to clients for about $150,000 to $160,000, with the goal that mortgage payments make up no more than 30 percent of the mortgage-holder’s take-home pay.

“We just sold a home to an Escondido family with four kids ages 8 to 16. Both parents work … but their combined income is $56,000 a year. They could never afford a home with today’s home prices and interest rates, but they’re a stable hardworking family and they deserve a chance,” Pfeiler said.

Yes, they do. And I particularly like that this opportunity is coming from a private charity rather than some government program.

Cortez, who has worked locally in construction for more than 20 years, said his whole family pitched in with volunteers in 1996 to build their 4-bedroom, 2-bath home on Sixth Avenue in West Escondido.

Youngest son Jose Jr., a 21-year-old U.S. marine, said he was too young to remember carrying buckets and supplies around the construction site 17 years ago, but he watched with pride how his father and mother have transformed their modest home into a beautiful oasis over the years — even adding a backyard pool 10 years ago.

“It was just a bare lot when we started and it has changed so much. It’s amazing,” he said.

The Cortezes qualified for a 20-year mortgage with monthly payments of $436. Jose said the low payments allowed he and his wife to provide a good education for their children, who are now 21 to 34 years old.

And apparently, none of that required them to get a HELOC or refinance their home in a mortgage equity withdrawal Ponzi scheme. Not everyone given the chance at the American Dream uses such restraint or wisdom.

Daughter Eber Cortez, a 24-year-old nursing student who commutes from Escondido to West Coast University in Orange County, said the home has been a tremendous blessing for her whole family. An older brothers went to auto body school, her twin sister is in college and a younger brother attended police academy.

At the picnic on Saturday, a stream of volunteers and other mortgage-holders stood in line to congratulate and shake the hands of Jose and Irma, who beamed with pride and graciously greeted each well-wisher. (Another Habitat family has also recently paid off its mortgage, but they were unable to attend the picnic.)

Jose said that on the day they signed their mortgage papers years ago, he and Irma vowed that they would set aside savings each month in hopes of paying the loan off early. Three months ago, they realized it was finally possible while they were examining their mortgage statement.

I have the utmost respect for these people. They truly achieved the American Dream.

“That was an emotional day in the office,” said Gary Pekala, finance director for Habitat in San Diego. “When they came in to pay off the loan there were a lot of tears among the staff. The Cortezes were hugging everyone and very happy.” Irma Cortez said the day was so emotional for she and her husband that they drove home from the Habitat office in San Diego in utter silence with tears streaming down their cheeks.

“When they came home that day I knew something was up because my mom was crying,” Eber said. “I asked her what was wrong and she said ‘this is your home now.’ I admire them a lot. They went through so much to provide for us.”

This is their home now. Loanowners and everyone else playing the big-mortgage game feel like they own their homes, but they don’t. They own their loan. When that loan is paid off, then they really own their home, but not until then. People lose sight of this fact — at least until they quit paying and a lender comes to boot them out of their home.

Jose, who has been an active volunteer for Habitat on many other home-building projects, said holding the deed to his family home means much more to him than just an end to monthly payments.

“We put a lot of sweat into that house and there are a lot of memories there,” he said. “We will never sell that house. It will be in the family forever and I want my children to raise their children there.”

The Cortez family. Real American heroes.

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73 SURFSIDE Ct Unit B Surfside, CA 90743

$1,485,000 …….. Asking Price
$965,000 ………. Purchase Price
8/21/2000 ………. Purchase Date

$520,000 ………. Gross Gain (Loss)
($118,800) ………… Commissions and Costs at 8%
============================================
$401,200 ………. Net Gain (Loss)
============================================
53.9% ………. Gross Percent Change
41.6% ………. Net Percent Change
3.3% ………… Annual Appreciation

Cost of Home Ownership
——————————————————————————
$1,485,000 …….. Asking Price
$297,000 ………… 20% Down Conventional
4.74% …………. Mortgage Interest Rate
30 ……………… Number of Years
$1,188,000 …….. Mortgage
$302,957 ………. Income Requirement

$6,190 ………… Monthly Mortgage Payment
$1,287 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$309 ………… Homeowners Insurance at 0.25%
$0 ………… Private Mortgage Insurance
$40 ………… Homeowners Association Fees
============================================
$7,826 ………. Monthly Cash Outlays

($1,820) ………. Tax Savings
($1,497) ………. Principal Amortization
$535 ………….. Opportunity Cost of Down Payment
$206 ………….. Maintenance and Replacement Reserves
============================================
$5,249 ………. Monthly Cost of Ownership

Cash Acquisition Demands
——————————————————————————
$16,350 ………… Furnishing and Move-In Costs at 1% + $1,500
$16,350 ………… Closing Costs at 1% + $1,500
$11,880 ………… Interest Points at 1%
$297,000 ………… Down Payment
============================================
$341,580 ………. Total Cash Costs
$80,400 ………. Emergency Cash Reserves
============================================
$421,980 ………. Total Savings Needed
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