Chicago Loft - photo credit by Lavender & Lilies

Finding a home in the perfect location at the right price can be difficult. It seems that most urban areas offer very small homes or homes that are extremely expensive.

Picture this; you find a terrific urban neighborhood that offers walking or biking to local shops and restaurants and the school district is distinguished, unfortunately the only house you can afford is under 1,000 square feet and you know that size just won’t accommodate your family’s needs. An alternative to a smaller abode might just be to raise the roof, literally, by adding a loft. Creativity is a plus in this scenario, you can A.) convert your attic into a room, B.) add a loft to a volume ceiling (higher than just a vaulted ceiling), or C.) raise the roof and build up.

Take the attic for instance; most families don’t use the entire portion of the attic for storage. With the help of a contractor, you can convert a portion of your attic into another room. Apparently, rafter attics are the easiest to convert without raising the roof, truss-built attics require more work to convert and may require an architect. A contractor will make sure your walls and floor will support the weight of an addition. Within your plan, a contractor will also make sure fire exits are available and take into consideration windows, sky lights, and air flow. Resource for attic conversions.

Can’t covert the attic? What about a vaulted-volume ceiling? If your ceiling is high enough, you can build a loft room or just a sleeping loft to add a little extra space. Sleeping lofts are quite popular in cities like New York where space is limited. Narrow ladders can be tucked away during the day and brought out when it’s time for bed. Resource for loft conversions.

West Hollywood Cottage - photo credit Sunset.com

Sunset.com recently showcased a small cottage in West Hollywood. Originally only 600-square feet without much land to work with, the couple built up and doubled the square footage. Adding plenty of windows, using bright white walls and geometric designs and colors gives the illusion there’s more room than what’s actually there.

Would you consider a smaller home in a better, or more prestigious, neighborhood? Would you add on?

Why is now a good time for me to buy?

Zestimate Historical Data Chart

Housing prices have fallen to an all time decade low while rent has continued to shimmy up. I currently pay a hefty price for a rental when I could instead be paying one-third less and own something in a comparative neighborhood. If I were to continue living in the area I currently reside, there’s one neighborhood in particular I’d choose; it’s the neighborhood in which I grew up in. It’s still a safe, primarily residential, middle-class neighborhood.

Using Zillow to focus on this neighborhood’s housing prices, I selected one property for sale to focus on to analyze buying viability. This particular property is similar in square footage to my apartment, almost 1,600 square feet, and has been updated with granite counter tops and refurbished wood floors. It’s definitely a “starter” home but not considered a fixer-upper. Using Zillow’s Zestimate chart, the property I analyzed has dropped over 10% in value over the past 10 years. That’s a huge drop considering this same property increased 35.22% by the end of 2002. It’s currently selling for a reasonable price of $345,000; steep for a “starter”  home in most states, but a deal in Southern California.

Of course, this is a short-sale home, meaning there’s a lot of messy paperwork surrounding this sale I’m sure. Researching the sales history, this home sold for $315,000 in 2003 and then $540,000 in 2005. Ouch! That was a 71% increase in two years. However, at $345,000 with a 20% down payment and a 3.75% interest rate (lowest interest rates in history!), the monthly mortgage payment would be $1,510 including tax and insurance – that’s $700 less than what I pay in rent.

So Why Am I Not Buying Just Yet?

I can’t predict what will happen to property prices over the next couple of years; they could go down or they could go up. Yet, that’s not why I’m hesitating to purchase property. My two biggest roadblocks to my decision are: 1. I still don’t have my down payment saved yet. As much as I’d like to save 20%, my goal at the moment is to save up 10% of $350,000 and I’m just not there yet. and 2. I may not be living in my current neighborhood within two years. Crime, graffiti, population increases, and the lack of job possibilities have made me rethink the area I live in and I don’t know if I want to live here another 10-20 years. If I purchase a house, that’s the minimum amount of time I’d live in it.

So for now, I’ll continue to rent, work towards my savings goal, and keep my eye on property values. If I see them begin to inch up at an alarming rate, like it did in the early 2000′s, I know I will have missed the boat…again. However, I think it’s safe to say we won’t be seeing that kind of increase anytime soon.

Are property values in your area declining or reversing?

ShelterKraft Werks Container Home

Could you tell me a little about what motivated you to build container homes?

Well, I’ve always loved the challenge of building small spaces - everything from secret forts when I was a kid to a neo-classic dog house.  The idea of using containers first occurred to me when I was working at Starbucks as a store architect, looking out of my office window at the Port of Seattle, with all of the big ships, stacks of containers and cranes, I began fantasizing about stowing away in a Hamburg Süd container and getting shipped to Germany to within 5 kilometers of my grandmother’s house. For the next 10 years, as I pursued various long-distance sailing and architectural adventures, I kept thinking about what it would take to make containers livable and how many ways you combine and stack them – like  playing with giant Legos!

In the fall of 2009 I came back to Seattle and met my partner Anne. With her extensive business experience and my design, engineering and construction background we began to explore the possibilities of starting ShelterKraft Werks. We got excited about how containers could provide a truly sustainable housing method, that also offered something more cost-effective in this new economic era as people are seeking ways to reduce their footprint both ecologically and financially with an awakening interest in small homes. From my sailing experience, I could see ways to make elegant and effective use of small spaces to create comfortable and functional living environments inside even a single container.

It all came together as a culmination of my lifelong passions and Anne’s entrepreneurial experience. What inspires us is the philosophy that ALL people should have a safe and secure place to call home. A home that’s affordable, appealing, durable, and sustainable.

How much do they cost (at minimum)?

ShelterKraft’s fully-built container house lines start at $35K for our CargoCottage(tm), a single 8′ x 20′ container that sleeps two, with kitchen, sitting area, and bathroom/shower. We offer a range of “stock” models up to a 2-bedroom house made from 2 40′ long containers with a base price of $68,000 (http://shelterkraft.com/products/stock-house-models/).

We also offer backyard office/studio spaces with a half-bath starting at $17,000 (http://shelterkraft.com/products/ecottages/).  We can also design custom houses that include additional containers, or stacked (multi-story) structures.

The price per square foot drops a lot as you build larger spaces, since a big percentage of cost goes into the kitchen and bath. On average, it costs 25-50% less to use containers than to use traditional (stick frame) construction for a comparable space.

What information do potential container home owners need to know- such as land requirements, plumbing and electrical, etc.?

All of the ShelterKraft houses come ready to install on the customer’s site, with electrical, plumbing and engineering (which can also include solar, wind, or other alternative energy and water systems). The customer needs to take care of preparation of the site, although we can provide consultation on what’s needed.  Depending on the particulars of the site and whether the house is a single container or multi-container structure, a home owner need only provide simple site preparation: a flat gravel bed or concrete slab with RV hookups (for a single container or more temporary structure), or a concrete foundation or pilings plus utility stub-ups (for a more permanent structure).  More information about site preparation and installation is included in our FAQ: http://shelterkraft.com/faqs/

As I mentioned in on your blog, we have had tons of interest in our homes and our biggest barrier seems to be finding creative financing solutions to under 400 sq.ft. houses (the FHA/HUD minimum size limit to a ‘viable’ house).

*Little House notes: These container homes are amazing. I’m also curious about the financing of these homes. Further research will most likely produce a follow  up post on  how to finance homes under 400 sq. ft.

Would you consider a ShelterWerks home for yourself or a guest house?

A credit score is determined by a few factors:

• 35% is based on payment history  – I score a B in this category. Just a few late payments a few years ago dinged me in this area.
• 30% is based on credit to debt ratio – I have an A+ here.
• 15% is based on credit age (the older the better) – I have an A+ here as well.
• 10% is based on the types or mix of credit -  I scored an F in this category (see my rant below).
• 10% is based on inquiries – I scored an A- here.

All of my categories look pretty good, except the credit mix. I’ve always been an “A” student, so seeing an “F” in one category made me see red. Using Credit.com, each section has a description that explains the possible reasons I received a particular grade in each category. Examining my credit mix, the only reason I could determine I scored an “F” is because I don’t have a mortgage. Here is an explanation from Credit.com in the credit mix category:

Credit Mix via Credit.com

I’m sure that the amount of student loan accounts don’t help (and it’s really not 11 – they’ve just been bought, sold, and rebundled a few times). However, the description states, “…consumers who have mortgages are more stable than consumers who do not.” Oh, really?!

I don’t think I can completely agree that homeowners are more credit worthy given the whole housing boom fiasco. During the peak housing boom years, pretty much anyone who applied for a home loan got one – and without their 20% down payment. Now, we’re seeing the repercussions – people are short selling and foreclosing at a higher rate than ever before. I’m pretty sure that these “home owners who secured a mortgage” aren’t more stable than me who has been paying rent on time for years (and years).

Let’s replay this – during the housing boom, a potential home buyer didn’t have to have stellar credit. These less than stellar candidates were granted home loans they really couldn’t afford. Now, many of them are foreclosing and short selling their homes and some are living mortgage free until there homes are sold or the bank kicks them out (Squatter -a person who settles on land or occupies property without title, right, or payment of rent.) Now as a renter, if I were stop paying my rent, I’d be given 30-90 days before I had to leave, not months upon months of mortgage free living. Aren’t I, the renter, the more stable consumer?! Don’t my years of rental payments count for something?! Why is it that rental payments aren’t factored into credit worthiness and therefore counted towards my score?

I’m not saying that people who are in precarious financial situations (such as a job loss or unforeseen medical bills) deserve to be bullied and picked on for foreclosing – sometimes bad things happen to good people. My rant here is that renters who pay their rent on time for years should be considered credit worthy. Somehow rent payments should be factored into a credit score.

What do you think? Should on-time rental payments be counted towards a credit score? Are home owners really more credit worthy than renters?

Are you at the point where you want to buy your first home? The middle class strive to own their own homes. Building wealth in real estate is one of the easiest ways to set up an easy retirement. I know that my parents followed this route and will retire in 5 years with a mortgage that is paid off. Think about how much less your expenses will be in retirement with a paid-off mortgage. It all starts with getting into a house at an early age.

When you are considering buying a house, many people will point out to you the hidden fees that come when purchasing your new home. It is great to know what you are getting yourself into, but without a down payment, buying a house isn’t an option. So, how should one save up a down payment? Here are some creative ways to save the 20% required for a home.

Set Your Goal

Before you set about the task of saving for your down payment on your house, you first need to establish your goal. How much do you need to save? Traditional advice recommends that you save 20% down when purchasing a home. You may be able to qualify for a loan that requires less, but the more you save means a lower mortgage payment. Figure out how much you are wanting to spend on a house and calculate what that means for your down payment. Having this concrete figure in mind when you start saving will help speed up the process. It keeps you moving towards this goal.

Reduce Your Spending

One of the first things that you can do to actually start working towards this goal is to reduce your spending. Many people often fail to save up for a house because they do not want to make any sacrifices. They want to have the benefits of home ownership without putting in the hard work to save extra money. If owning a home means that much to you, you should be willing to give up certain things. Can you give up eating out for a couple years to save for that down payment? Or perhaps you can give up cable and going to the movie theaters for a certain time. If you cut your spending, you will be surprised at how much faster your down payment builds up.

Increase Your Income

If you are looking to speed up the process even more, why not work to earn extra money? A few extra dollars here and there may not seem like a lot, but it adds up in the same way that cutting back on your expenses does. Try to think of ways that you can bring in a few extra dollars. Can you sell unused items or perhaps help out your neighbors in some way (for example: baby/pet sitting)?

If home ownership is your ultimate goal, starting with these three steps will help anyone reach this goal. Find creative ways to reach your goal and celebrate your progress as you go along. Before you know it, you will be living in your own house.

What things can you do to save for your down payment? Or what did you do to save for your first down payment?

I am currently 27 and live in a shack with my husband of a year and a half. We have paid off credit card debt, paid off our car loan, have survived living on one income for four months, and are planning on starting 2012 with a bang to save up for a house down payment.

We hope to own a home in five years. This is our plan.

1. Pay off remaining $2,000 credit card debt.

We paid off our car last month, which brought down our total debt down to a $2,000 credit card, and a little under $20,000 left in student loans. We plan on paying off the card within the first few months of 2012 (which is currently at 0% interest until April 2012). We will continue to tackle the student loans by increasing our payments.

2. Save, save, save

This past year, with both of us working, we were able to save $8,000 in eight months as a back-up/survival fund for when my husband would stop working for four months to enter the fire academy full-time. Now that he is going to start working again at the end of December and we’ve managed to live fine off my income, we hope to save all of his income for as long as possible.

3. Upgrade

When we found out that Eric wouldn’t be working for four months, we downsized from a one-bedroom apartment to a guesthouse/loft in someone’s backyard. It’s not the ideal living space, but it’s managed to save us a ton of money (and probably is the reason we were able to stay afloat these past four months on one income). I think we’ve paid our dues though–and while we would love to continue saving a ton of money, the reality is that our sanity is more important. And so is a nicer place. I’m thinking one with a dishwasher, a bedroom door, and heating that doesn’t come out of a portable heater? Is that too much to ask?

4. Get a raise, contribute toward down payment

Within the next five years, I definitely plan on getting a promotion with a substantial raise at work. We will probably increase our means of living a bit with this new raise, but I also hope we can contribute a good chunk to our down payment. I know my husband expects to be hired as a full-time firefighter within the next five years as well (it’s tough competition for firefighter positions in southern California), and that will increase our income substantially.

5. Still manage to have fun

I want to own our own home. I still plan on living frugally. But I don’t want to forget to have fun, and that includes traveling. I want to travel as much as possible before we have kids. And even though we’ve been married a year and a half and we still haven’t gone on our honeymoon, we will one day. I also want to go to Europe. I want to try and fund our travels through a separate “extra” fund. Meaning, any extra income we earn that doesn’t come from our immediate income, such as mileage reimbursement checks from work, mystery shopping money, blog advertising, and tax returns.

What are your steps to buying a home? Any tips for us?

*Little House says: This is an awesome plan. I really like how you downsized when your income situation changed. I think people can learn from this. Thanks so much for sharing!

During the housing boom, many people forgot to ask themselves this question. Historically, the financial sweet spot has been to purchase a home within 3-times your annual salary range. For example, if you gross $80,000 annually, you can comfortably afford a $240,000 home. Of course, in Southern California this limits me greatly with houses still averaging over $320,000. But all is not lost. There are places throughout California where I can still find a home for under $250,000. Of course the questions comes down to “Do I want to live there?”

I digress. Guiding home affordability, besides the simple 3-times your salary financial rule, are mortgage calculators. There are some terrific calculators (like emortgagecalculator) out there that factor in your down payment, home owners insurance, and property taxes, calculate your monthly payment and how much you will pay in interest over the span of the loan. The amortization charts are always scary to analyze, but paying off your mortgage early can alleviate some of that anguish by lowering your total interest payments. Just because you agreed to a 30-year mortgage doesn’t mean you can’t pay it off earlier.

Once you’ve worked the numbers out and have found a price you can comfortably afford, it’s time to get the rest of your ducks in a row. That means, making sure you have little or no consumer debt, your credit score is closer to stellar than subordinate, and you have saved a decent down payment (as close as possible to 20% or more.) Don’t forget that you’ll need some money for closing costs, so factor that into your savings as well. You might also want to factor in repairs and maintenance money as well.

As I prepare to purchase a house in the next two years, my goal is to save about $60,000. A lofty goal, but with dedication and determination, I should be able to make it!

How did you prepare to purchase your first house? Any tips or guidelines you’d like to share?

This post was originally published on February 16th, 2001. However, it’s still very timely. Enjoy a past post.

Depending on which area of the US you live in, short sales seem to be increasing in neighborhoods; especially in the Southwest. No matter what the reason for the short sale is, i.e. job loss, increased mortgage payment, or underwater home loan, this seems to be a growing trend in the housing market. I personally know someone who is in the middle of a short sale, or strategic default as lenders like to refer to it as.

And a burning question among these home owners seem to be; When can I buy my next home?


For people who have never experienced this problem, or who sat on the side lines during the housing boom and were just fine renting, the idea of buying a house after a short sale seems a bit rash and irresponsible. I’m not usually one to judge people for their actions, but if you’re in the middle of short selling your house and are already talking about buying a bigger, nicer home within the year, it just seems a bit…well, wrong. It’s hard for me to believe that a bank would be eager to lend money to a person who just shorted another bank hundred’s of thousands of dollars. But what the heck do I know? I’m just a renter.

My curiosity on this subject prompted me to research this topic and find out just how soon a person could obtain a mortgage after a short sale. After some research, the answer isn’t very cut and dry; it depends on where the new loan will originate:

• Fannie Mae and Freddie Mac - With a decent credit score and a 20 percent down payment, a person is eligible for a mortgage two years after a short sale. Of course, the key here is maintaining a good credit score and making sure you have a down payment. After four years, you only need a 10 percent down payment. Though I wouldn’t bank on Fannie and Freddie four years from now since the Obama administration just presented a plan to dissolve these two entities over the next several years. Update: Scratch that. I’m pretty sure they’ll still be around, but you better make sure you have some sort of down payment.
• Federal Housing Administration - With a good credit score a person is eligible for a mortgage through FHA within three years (or longer) of a short sale. However, there are some extenuating circumstances that would allow you to purchase a home right away, but this is difficult to prove and you have to have been current on your house payments for 12 months up to the short sale (almost impossible because most banks won’t short sell your home  until you default on a payment, making this a bit of a catch-22).
• Conventional Loan – I’ve found varying answers to this one, anywhere from 1 year to many years. Again, most banks will want to see a decent credit score and a down payment.

There are some situations out there that warrant short selling a home such as becoming unemployed and/or being offered a job position in another city or state, or health issues or a death in the family. All of these circumstances are understandable since they are out of the control of any one person. Actually, the FHA will grant a home loan right after a short sale for exactly these reasons.

But if you’re trying to take advantage of the market, as in you are no longer happy with the price you paid for your home and now want to purchase a bigger, nicer home for half the price, you’ll have to wait a little while.

Are you in the process of short selling your home? Are you doing so because you have to, or you just want to (very different reasons)? Is it fair to ask for a wait period and a down payment?

My husband and I love watching movies at night, thanks in part to Netflix, it’s really easy for us to download a new or older flick. However, we have noticed a disturbing trend in movies, even those that are 20 years old or more. The characters in films, whether they are broke, middle-class, or wealthy, have beautiful homes. It doesn’t matter if the character in the film has a high paying job, or a minimum-wage salary, or is out of work, they somehow own a substantially-sized home. How can this be? Basically, as my husband so eloquently put it, the film industry is selling us the lie of the American Dream.

Whorush: 5 sites by this AdSense ID

Whorush: 5 sites by this AdSense ID

Let me begin by saying that I know a few years ago, with the whole mortgage fiasco, many people were able to purchase a home well above their financial means. So, perhaps 20 years ago, it was a similar situation, which is why we also see this trend in older films as well as newer ones. I know films also exaggerate life, and films only want to show us what we want to see. According to tinsel-town, the American public wants to see all families living in large, beautiful houses. So, the lie perpetuates because we want it to.

Yet, it got me thinking, is this American Dream something that is a reality for most people? Does the film industry take the majority of the population’s living situation and just expand it for all it’s characters? I did a little homework on BestPlaces.net to check the percentages of home ownership across the nation in a few different cities and this is what I found:

• First, I took a look at Los Angeles, CA, since this is the county I live in. The home ownership rate here is 37%, compared to the national average in the United States of 64%. Okay, so this makes sense considering the high cost of property. What doesn’t make sense is the recently released movie, Smother, (a really bad movie, by the way) showing a young couple owning a beautiful Craftsman-Style home in Los Angeles on a beautiful tree-lined street. In this movie, the character’s include a wife, that is a teacher (we all know that teacher’s aren’t wealthy by most standards), and a recently laid-off husband, who goes back to selling carpet. My take: Selling the American Dream by Lying. (Two other movies off the top of my head with similar scenarios that take place in LA: I Love You, Man and Big Trouble : outrageous homes on a small income).
  
• I then compared Fargo, ND, whose home ownership rate is 45%, to the national average of 64%. One of my favorite, slightly older, movies is Fargo. According to BestPlaces.net, less than half of the people in this city are homeowners, so again the reality of all the movie’s character’s living in a terrific home is off. My take: Selling the American Dream, though the freezing cold winter’s may keep some people from settling down permanently.
• A more realistic view from a film that I like would be Singles, a movie about single people living in Seattle (again a film from the early 1990′s). The characters in this film all rent apartments and struggle to meet a life partner and pay the rent. According to Bestplaces.net, this is a more realistic view with the home ownership percentage at 45%. My take: A realistic perspective of young 20-somethings and early 30-somethings trying to keep their heads above water and get their life figured out.
• Another city I compared is Albuquerque, NM, with a home ownership rate of 56%. You could almost call it Americas Home Place since more than half the residents own homes. I recently watched Sunshine Cleaning, set in Albuquerque, NM. The film stars the lovely Amy Adams (from Enchanted). The house the main character owned was quite a fixer upper, but it made sense considering she was a single mom who cleaned houses for a living. My Take: a much more realistic version of life, which is refreshing in a film.

Sunshine Cleaning - a more realistic life view coming from the film industry.

Of course, I’m not quite sure where Bestplaces.net came up with the national average figure of 64%. Each city I researched, and there were quite a few others that I didn’t list, kept coming up around the 50% range. There must be one state in which the majority of the population owns homes, but I didn’t find it.

Do any of you notice this in films you like? Do you ever find yourself sneering at the characters saying, “How did you afford that lifestyle and that house on your meager income?” Do you think the film industry is purposely selling the American Dream or just trying to lift our spirits and give hope to those that haven’t achieved it yet? I’m I being too cynical, or obessing over this topic?

A quick search revealed that Ikea has a section on their website dedicated to small space ideas. They highlight how the room was organized maximizing the space and offer photos of families “living” in the room. The rooms used in the videos and photos are still the model rooms, but seeing pictures of people in the room, “living” in that small space, gives a better idea of its functionality.

Ikea Small Space Ideas

In my opinion, the photos of many of the rooms are a bit cramped once you add a  family of 3 or 4, but one or two people could definitely live somewhat comfortably within the small square footage. Yet,  most of the ideas Ikea offers for maximizing space can be used in any size of a room. For example, using glass-front cabinets that extend up to the ceiling allows for more storage, but still keeps an airy, open feeling through the use of glass. Or using two chaise lounges that you can move around the living room for more or less space is a great idea.

However, some ideas seem a bit ridiculous like having a bunk bed in the living room with only a curtain to pull around an adult couple. It might work for a single couple, but throw in a couple of kids and I’m not sure how comfortable I’d feel about that. In my defense, I don’t have kids so maybe I don’t understand that privacy goes out the window. (Any parents want to comment on this?)

Their small space website really cemented the idea that creatively utilizing all areas of a room (floor to ceiling, loft sleeping for guests, cubbies and cabinets) saves floor space, hides toys effectively and items which are rarely used, and allows more room to move around. Ikea’s space saving ideas can come in handy in any household.

How do you effectively utilize your space?