Cut up those credit cards?

One of my goals for this year, that I have partly accomplished, is raising my credit score. I need to get my score above 740, at minimum, so that when I apply for a mortgage loan, I’ll be able to get the best rate. I still need to raise my score about 40 points (this is an average as all 3 credit bureaus are reporting slightly different scores). One thing I’ve learned about improving my credit score, is keeping my debt to credit ratio low. Since I’ve paid off all of my credit cards, I’m looking pretty good here. However, another factor that affects a credit score is how much total credit banks are willing to loan you. Since I’ve been on a mission to improve my poor credit history, I haven’t had much credit extended to me these past few years leaving me with very low credit limits.

So, here is my dilemma: I have two credit cards with low credit limits that are charging me monthly fees and/or annual fees (totaling approx. $155 for the year) . I don’t use these cards at all anymore. However, there is a catch with these two cards: they were originally a way to pay off old collection debt. These cards were offered to me about 6 years ago to pay off two other credit cards that had gone into collections. Once I paid the old debt off in full, they extended a limited amount of credit to me. I’m now thinking of canceling these two credit cards now that they are paid in full, but then my overall total available credit limit will be reduced by almost $1,000. How will this affect my credit score? Will it ding my score by a few points? Since I’m hoping to apply for a mortgage loan with in the next year or so, I’m trying very hard to keep the activity on my credit report to a minimum.

After doing some research, canceling my two credit cards would probably affect my credit score a little bit. By how much, I don’t know exactly. I have two options; A.) I cancel these cards and save $155 annually, with the potential of losing a few points off my credit score, or B.) I keep these cards until I am able to purchase a home.  That could be up to 18 – 24 months meaning I would have to spend up to $310 on fees, but I’d be saving my credit score.

For now, I think I will keep the cards. If purchasing a house becomes ever more elusive and my time frame extends to more than 24 months, I might just go ahead and cancel these two cards. I do know that when I obtain that mortgage loan, these two cards are getting the ax!

What do you think? Would canceling these cards now be beneficial? Am I making the right choice by keeping these cards a little longer?

Rain Barrel Harvesting (Photo by Sunset Magazine)

I’ve been researching some ways to “green” up an existing home, in case we end up purchasing a “fixer-upper”. Some of these ideas are less inexpensive, like losing the lawn and planting drought-tolerant plants in a semi-arid region, others are more expensive like installing solar panels and running a portion of your household energy off of it, then reselling the excess to your utility company (a sweet deal!). But an idea I researched a while back, and the recent rain storm made me recall this idea, is rain collection in arid and semi-arid areas. Indulging my continued curiosity, I further investigated this idea through Sunset Magazine, I love the photos in this mag. They had some inspiring, and unusual, ideas for collecting rain. However, before I begin describing some methods, let me explain a few laws about rain water collection that I didn’t know existed:

• Colorado: If you live in Colorado, the rain that falls from the sky is not yours to keep! Did you know that? Because many of their streams feed into rivers that deliver water to other states, all rain water is supposed to end up in the streams. So rain water harvesting (I like this word) in this state is out for now. (source: Wikipedia)
• Utah and Washington: You may harvest rain water only if you own the rights to your ground water. So if you are using well water, you may then collect your rain water. I’ve read on other sites that this law is not enforced, so you could probably get away with collecting it on the down low. (source: Wikipedia)
• New Mexico: In contrast to neighboring Colorado, some areas require rain water collection on new dwellings. What a terrific idea! Most likely, this is due to their desert-like region. (source: Wikipedia)
• Arizona: Due to their desert topography, homeowners can receive a tax credit for capturing and recycling rainwater. (source: Sunset Magazine)

Other states and regions may have laws regulating stagnant water and collection techniques, so if you’re unsure, you may want to check with your city.

Now on to some rain water collection methods (all require containment or lids to avoid open, stagnant water):

• Rain (whiskey) barrel collection: With a little work, and a gutter system, you position your rain or whiskey barrel at a point where your gutters drain, usually at a corner of your house or structure. Affixing a hose or pipe from your gutter to the rain barrel, the rain collects into the barrel. They can hold about 50-60 gallons. A spiget towards the bottom of the barrel makes it easy to use the rain water.
• Rain Chain: This is a beautiful way to collect rain. The rain drips down from small bowl to small bowl, then eventually ends up in a catchment of some kind. It can fall into a creek or rock covered area of your lawn. Beneath the rock area would be a tank that holds the water until you need to use it.
• Cistern: Using a gutter system, cisterns can hold hundreds to thousands of gallons of rain water. It’s a more complex system, but if you have a huge yard or garden, this might be a feasible option.

Here are a few links I came across that describe in detail how to build a rain water harvesting system (and sell the supplies you would need to start this process!):

• A beautiful way to catch rain water.
• A huge assortment of whiskey barrels.
• How to collect rain water. Treehugger also has additional links at the bottom of this article on how to store it as well.

How many of you reuse your rain water? How do you collect it? Have you thought about installing a system recently? What if you live in an apartment, can you find a way to use rain water to water your house plants?

A nice house. But should I buy it?

As I browse the business sections of MSN.com, so many articles are written to encourage prospective buyers to take the plunge and buy a house. Headlines read like a “going out of business” sale, “Mortgage rates at rock bottom, buy now” is the theme. But just because mortgage rates are the lowest they’ve been in years, and home prices are much more reasonable than three years ago, does that mean everyone should go out and buy a house?

I’m playing devil’s advocate here, even though my goal is to purchase a home of my own, because I think these articles that are appearing in the business section of major news sources mislead prospective buyers. My stance is this: No one should buy a home unless they are financially prepared to do so, no matter how low interest rates are or how inexpensive homes may seem. Financial Samurai recently posted his interview with Consumerism Commentary and stated that he believes in the 30/30/2 rule when it comes to purchasing property. That is you have 30 percent saved, for a 30 year mortgage (I think this is the second 30, I can’t remember this one – Sam?), and pay no more than twice your annual income for the house. I agree, but with a slightly different variation; a person can probably comfortably afford a home at 2.5 time their income.

This means, however, that if you want to purchase a $300,000 house, you need $90,000 saved. How many new home buyers do you know that put down that much in cash for a house? It’s difficult to save that much money when an average salary hovers around $40,000. And, if you only make $40,000 a year (add a spouse that may equate to $80,000 total income), your home should cost no more than $200,000. Where I live, there are few homes in this price range. So what does this mean? It means I’m not ready to own a home yet, even with articles luring me to purchase because mortgage rates have never been this low and are primed for spiking within the next year.

Marketing pressure is what lead to the recent housing bubble, hopefully this pressure isn’t leading more purchasers down this same path. With tighter lending practices in place, due to the financial melt down, this should remedy some of the problems of the housing market. However, no matter how enticing home prices and mortgage rates seem,  I won’t be making that plunge until I’m sure I can afford a home comfortably.

What is your thought on buying a home? Is it always the best option? Are renters financially illiterate people? What about all the articles sounding like advertisements for prospective home buyers? Should people follow the advice and just buy a home before it’s too late?

Recycled House by DRW

I love writing about little house plans, or residential architecture in general. Yet it takes some research, on my part, to find new home designs, links to great sites, and then time for me to organize my thoughts into legible paragraphs. I keep thinking that I’ll set aside one day a week for house plan posts, but with my limited amount of time, this isn’t going to happen any time soon.

But with that being said, I did find time this week to research some ecofriendly house designs that I thought were interesting.

• Circular home designs - Deltec Homes: I’ve never been a big fan of octagonal or circular homes. I just didn’t understand the purpose to them. However, I found the Deltec site that explains it. In so many words, the point of them being there are no “load-bearing” interior walls allowing for just about any floor plan layout. Their roof acts as the supporting beams, so the modifications to the interior are endless. I can see this being a huge factor if one wants a very open floor plan. The only drawback I see to circular homes is that many of the walls are curved. This would drive me crazy placing furniture against them.
• Passive Solar Designs – The Plan Collection: Passive solar is a up and coming word these days. Basically, if you design the house with enough light and windows pointing in just the right direction, you can heat your house naturally. This would save money on your gas bill during the fall and winter months. Though, I would worry about the summer months in warmer regions, like say, Arizona! You don’t want your house acting as a sauna.
• More Passive Solar Designs - SunTerra: I like the fact that SunTerra explains the point of a passive solar home and includes the importance of overhangs for shade. They also calculate how much money could be saved on heating a house passively, approximately 1/3 overall. Their home plans include explanations of how each home’s architecture reinforces green building ideas such as a zero energy home and an earth sheltered home. I also learned the purpose of a flatter pitched roof:  it decreases the interior volume improving the energy efficiency.

As a more critical consumer, many house plan sites I come across boast about “green building.” But to put things in perspective, green building really boils down to being resource efficient. The more recycled materials, the less stress is put upon the environment. My all time favorite home builders is Phoenix Commotion: taking one persons junk and turning it into another person’s treasure.

Mesa House in Arizona

My trips to Arizona always leave me questioning life style choices. I think it’s because central Arizona, to me, is a conundrum: It’s a beautiful state in the winter, and a horrid place in the summer. The newly paved roads make driving pleasant, yet the endless mini-marts and beige-colored housing developments make for a boring and repetitive landscape. Which brings me to the topic of endless housing developments.

With each visit, usually twice a year, I notice a new community that wasn’t there before. Of course building has slowed over the last 18 months, but there are still areas that are going strong. For instance, my sister-in-law lives in a new development in the far east end of Maricopa county. On our last visit, her’s was the only one in that vicinity, making it easy to find. This visit, we noticed many more had been completed and we had the darndest time finding her street. Every house was brown or beige, or a variation of taupe, making it very confusing to find the right street to turn on. With housing communities all butted up against each other, there are very few landmarks to cue a driver where to go. Eventually, we figured out that by counting the streets, we could navigate her look-alike community.

After four years of my sister-in-law (SIL) and her family living in their newish house, many things are already falling apart and looking worn. Some of this may have to do with their three children. Children usually aren’t very careful with banisters, doors, or cleaning up after themselves. However, some of the things my husband and I noticed, had nothing to do with little hands touching it. They seemed to have more to do with the quality of the houses. Like the creaky doors, for instance. I live in a rental house that is over 50 years old. My interior and exterior doors don’t creak when opened. The back patio door of my SIL’s house sounded like a door off a haunted house. Since my husband smokes, he would remove himself to the back patio, but felt horrible that every time he opened it, it would make a loud crrrrrreaking sound. Another item that seemed like it was really poorly made were their bathroom floor tiles. The edges were already chipping and the grout was completely cracked in many places.

Knowing that they paid a premium price for their home four years ago, I decided to keep my opinions about the quality of their house to myself. Or in other words, I kept my mouth shut. Yet I realized that they may not have had much choice in the matter. With home builders developing mass quantities of homes in short periods of time, the quality of the homes seems to have been at the bottom of the contractor’s check list. Why pay for premium materials when the home owner may not notice the difference? Or at least, not when the house is brand new. A few years back, when buying homes was a frenzied activity, home builders could get away with building quick and crappy homes. With time and wear, however, the lack of quality really stands out. I’m not sure if my in-laws are thinking of selling their home anytime soon, but the wear and tear will definitely have to be remedied before they do.

Have you bought a new home recently? Is it made of quality material? Have you lived in an older home and noticed that the home seemed more durable?

Returning from my trip to Arizona, I began comparing my city (a suburb of Los Angeles) to the Phoenix/Mesa/Tempe area of Arizona. I observed some drastic differences that got me thinking about my quality of life here in Los Angeles.  Let me preface this by saying that I’ve lived in the Los Angeles area for over 33 years and consider it my home. But, I began thinking about what makes a city run smoothly, remain clean, and how cities keep up with their population growth.

A few things that really stood out when I was visiting in Arizona, that got me comparing it with Los Angeles, are the following:

• Roads and traffic
• Cleanliness
• Air quality
• Cost of living

Los Angeles is a sprawling city of too narrow roads and freeways with endless tail lights as far as the eye can see. Our potholes are almost as famous as New York’s, they can swallow whole SUV’s in a matter of seconds. Our population is larger than the Phoenix metro, by about 5 million. But in contrast, the  roads in Arizona are 6 lanes wide and newly repaved. Their highways are smooth, wide, and the city is continually adding more connections and highways to link their also sprawling communities making traveling around the city pleasant. The difference between these two cities, at least with city planning, is that Phoenix is anticipating a larger population – they are thinking ahead. Los Angeles, being an older city, never planned on so many people inhabiting the area. By the time our population had swelled to current numbers, we were land locked and unable to expand our highways. Obviously, geography does play a part. We are slightly more mountainous than the Phoenix area. Yet, for the amount of money I pay in auto registration and insurance, I feel shortchanged in the quality of roads I travel on.

Another drastic difference I noticed while in Arizona was the clean road sides and NO graffiti. Phoenix either has a terrific road side crew of maintenance people, or their population is more conscientious of throwing trash out their car window. Los Angeles, on the other hand, is littered with garbage from one end to the other. Our road side crews can’t keep up with the amount of trash, and somehow people can’t make it into the trash cans! Graffiti is another problem in our city, everywhere you turn you can find graffiti somewhere on a wall or side of a building. Again, in Phoenix I didn’t see one dab of spray paint anywhere. Unless their roadside crews are also constantly repainting walls and buildings, their population must be less likely to “tag” their turfs. As a city with one of the highest sales tax rates (almost 10%), I think my money is getting lost in the shuffle. It surely isn’t being invested in keeping the city clean.

California was one of the first states to implement zero emissions on their vehicles. Yet, in Los Angeles, you’d never know it. Our air is frequently a warm shade of beige. The coastal fog combined with factory and auto emissions equals smog. Considering our population is very health-minded, it’s ironic that we have the worst air quality in the nation. While in Phoenix, I noticed that I couldn’t see the air. This is a good thing, because air is supposed to be clear! I know that during their sweltering summers, their air quality isn’t as good as during the winter months, but at least they have a period of clean air.

Finally, there is the cost of living comparison. I’m always flabbergasted by how inexpensive other cities are compared to Los Angeles (except New York, of course). For example, the sales tax in Phoenix is just above 6%, that’s almost 4% less than L.A. Groceries, restaurants, and gas are much less as well. And homes? Well, let me just say that because of all the new communities popping up in Phoenix, you can nab a new home for under $100,000. The home prices are posted on all of the new development signs, ranging from $99,999 to the low $200,000’s. Finding a decent home for mid- to low- $200K in Los Angeles county is a near impossible feat. (I do want to touch more upon home developments, but I’ll save this for another post).

My comparison between these two cities made me realize that my husband and I need to move out of Los Angeles county. We are currently considering Ventura county, or moving just north of Los Angeles. We still want some of the benefits of being near a large metro, like the opera, shopping, the Getty Museum, and a variety of restaurants. We also like the idea of living within an hour of the beach, even though we really aren’t beach people. So, with a county population under 1 million, traveling around town will make life much more pleasant. Bike riding will also feel safer as many of Ventura counties’ cities have marked bicycle lanes. As we begin planning our move, I’ll be keeping these items in mind when choosing our new “home” city.

What do you like about your city? What do you dislike? Have you recently moved because of similar problems? Do you see your city becoming run down? How does that effect your psyche?

In another life, I will become an architect. I absolutely adore researching residential house plans, both exterior and interior. There’s so much history associated with the how and why of design. For instance, early saltbox style farm homes were mostly vertical in design from the exterior, with chopped up small rooms in the interior. My guess is that with the common-place large families of the past, each person needed their own space within the house leading to smaller rooms. This floor plan would also be easier and less expensive to heat in the winter, you wouldn’t have to heat the whole house, only one small room that the family could crowd into.

Over time with a decrease in family size, the floor plans began opening up. There wasn’t a need for so many rooms because there weren’t as many people living in the house. All of a sudden the same square footage seemed much more usable because there were fewer people utilizing the same amount of space.

Another factor influencing home design was region. The northeast is known for it’s row-style homes and cape cod architecture. Victorian also had a strong influence on architecture on the eastern seaboard.  Many of their homes include large, screened porches to keep the gnats out. With all the humidity, it’s no wonder the screens are so popular.

The mid-west homes have evolved from saltbox style farm homes to one-level ranch style. This movement, I’m sure, was due to the influence of Frank Lloyd Wright. His idea of incorporating the outside with the inside had a huge impact on homes built in the 1950’s west of the Mississippi. I especially love the homes of some of the more modern architects of his time, like Joseph Eichler and Gilbert Leong. These homes were built with the same concept, lots of windows and light, an open floor plan, and a great utilization of a central space.

Here are a few sites that have some great floor plans, no matter what style you prefer:

• Cool House Plans: They have a lot to choose from, including some small backyard projects. They also offer narrow lot floor plans.
• The House Designers: Wonderful tiny house plans to choose from. I really like the Maple Street Plan. It’s adorable! Oh, and the Rosabella. It’s a beautiful Mediterranean house plan.
• Cusato Cottages: These are the Katrina Kit homes offered by Lowes. However, I’ve never seen this site before, and it actually goes more into detail with the plans.
• Clayton Homes: They offer a lot of different manufactured plans, but I really love their i House. It reminds me of the modern architecture of the 1950’s. I’m a SoCal girl, what can I say.
• The Bungalow Company: I also love craftsman homes! See, I should really be an architect. I can’t even decide which is my favorite!

I’ve noticed that some of these sites don’t list build prices. This always leads me to believe that they may be more expensive than the sites that do list square footage price or kit home price. However, they are a great place to start looking at least! (Or dreaming in my case.)

Just the other day, Get Rich Slowly wrote a terrific post about renting versus buying property. I’ve been meaning to write my own post about this, especially since purchasing property has been on my mind now for over a year. It is also one of my goals I hope to accomplish by the end of this year or the middle of next year. However, I’m still not ready to take the plunge for a few reasons:

• Down payment: I don’t have the down payment saved up. I’d like to have at least 10% saved, which would be about $30,000 on a $300,000 home. I am really far from this goal.
• House prices: Decent homes in good neighborhoods are still selling for around $300,000. We live in a suburb of Los Angeles, so our prices are a little inflated compared to the rest of the nation.
• Fluctuating income: My husband owns his own business and it’s currently a little slow (normal for January). I work as a substitute teacher so I’m not ever guaranteed work. This will also make it a little difficult to qualify for a traditional 30-year mortgage at a decent APR.
• Indecisiveness: Lately, there are a few things about LA that are really getting on my husband’s nerves. He’s been complaining about everything: from the traffic to the grocery store clientele, to our neighbors. I’m not so sure he’ll be happy in LA in a couple of years if the city doesn’t begin to offer better services, smoother roads, or less traffic! Also, there is little hope for me obtaining a teaching job within the next couple of years with the school district I work for. They are one of the largest districts, and can’t find the money to continue paying it’s teachers. I live smack-dab in the middle of that district.

This brings me to rethink our idea of purchasing property. I know that we will eventually be property owners, I just don’t know if it’s going to be as soon as I had hoped. I have been really struggling with this new train of thought. That is until I read J.D.’s post. Basically it boiled down to what it really means to own property and is it a good investment?

Deep down I know that owning property is a good thing. If by the time of retirement, the home we purchase is either paid off or is worth more than we purchased  it for, it could be used to help us retire or move. It could function as an added security later in life. However, if we move only 5 years after we purchased our property and the market hasn’t improved, we would be breaking even if we’re lucky. In that event, we would be better off renting.

I found a great, free calculator from Yahoo.com that puts renting and owning in perspective. (I tried the NY Times link on GRS, but you have to be a subscriber to use it). Here is what the calculator figured out based on my numbers:

Rent vs. Buy Calculator

You’ll notice that based on these figures, it would be better if I continued to rent. The only thing this really doesn’t calculate is the profit earned by selling the property. I’m not quite sure how that works, but I would think that if you purchased a property for $300,000 and decided to sell 20 years later, the property would be worth more than what you paid for it. This is in sharp contrast to renting for the same period of time, there’s no profit in that scenario at all.

Again, I do intend to be a property owner myself in the near future. At least now I don’t feel as rushed or guilty if I don’t own my own little house in the valley by mid-next year.

What are your thoughts? Does this calculator factor in everything? Or is it missing the resale value somehow?

As I rack my brain for alternatives to purchasing a house, I seem to lean towards prefab homes and kits. Every time I swing by the Home Depot, positioned just outside their front door, are a variety of Tuff Sheds. I walk inside the empty shed and it seems spacious and roomy. Granted, the shed doors are wide open and there’s not a lick of furniture, or anything else for that matter, inside. But for $3,995 it’s a bargain!

Having such a curiosity about kit homes, I wonder if there’s any way to put a couple of Tuff Sheds together and call it home, or at least a temporary home. As I begin to seriously consider this option, I decide to check out their website. Not only do they make sheds, they also build garages. Ding! An idea strikes. Having browsed many a home plan, I know that it’s possible to build an apartment above a garage. Surfing through their photos, I find just the picture I hoped to see: a two-car garage with a loft/apartment.

A Tuff Shed Two-Car w/Apartment Garage

With an apartment above the garage, not only could our car fit, but we could also use the other half of the garage as storage. My thinking is this:

• Buy affordable land. I’m not sure where this land will be, there’s really nothing in my area, but this is key to making my plan work. (Perhaps this is a faulty plan?!)
• Build a temporary shelter on the cheap. This is where the garage with apartment comes in.
• Park the car and storage in the garage. Since we’d be on our own land, we might as well keep as much stuff as possible in our garage instead of paying for storage. A two-car garage with apartment would do the trick.
• Live in the apartment. Most above garage apartments are large enough for two people. We primarily use our bedroom and living room the most. I think we could hack it in a small-ish apartment.
• Build a house. As we save money living above our garage, we could save for our dream house.

My plan began to sound possible once we received a quote from Tuff Shed. For $28,000 they could build us a two-car garage with apartment. Not bad! The biggest hurdle, besides the land purchase, is the preparation of the land. However, the garage doesn’t need that large of a foundation. And looking at the photo (above) that I found on their website, a flat pad will do.

Now, if I could just find some land!

As someone who teaches young people, it’s easy to see through their eyes. Often they miss the “big picture” and instead focus on the tiny details. And this isn’t because they aren’t capable of seeing the main idea, it usually has to do with the nitty-gritty work they do in class. Which boils down to making sure they have a concrete understanding of the tiny details that build up to the big picture.

Today,  a glaring example of missing the big picture jumped out at me. The students had figured out how to turn improper fractions into mixed fractions using the steps they had learned, but really couldn’t visualize how much an improper fraction, like 11/5ths, was. There was definitely a lack of the main point. But many of my “ah, ha” moments are similar to this, I immediately see where students, and people in general, can be so focused on the details and the actual processes, that they miss the big picture.

This brings me to my main point, visualizing the big idea before, during, and after working on the steps towards the goal. I can use this is in my quest to own a little house in the valley. My big idea is to become a property owner. Sometimes this goal gets lost in the details of saving for a down payment, working on my credit score, and paying off my debt. These steps are all hugely important, of course. But, I need to be careful not to get too caught up in missing the big idea. I realize that at some point on my journey, I may just have to take a step back, realize what I want (a house), and dare to go after it. Which is basically filling out the paperwork to get pre-approved.  Or it could mean taking a daring chance and looking in other less expensive areas, which would mean moving to an unfamiliar location. Both of these risky steps may bring me closer to my final, and ultimate, goal of home ownership.

To really bring my idea home, here are a few other examples of where the big idea sometimes gets lost:

• Saving money shopping: I’ve recently become a coupon clipper, and love the money I save. However, I’m not willing to drive out of my way to get the absolute best deal in town. This is something my parents do. The money they save on groceries is probably negated by the gas they spend driving all over town looking for the best deal.
• Watering the lawn on a rainy day: I know that many people have their sprinklers set on timers to save money during the dry months. However, it makes sense to quickly disconnect that timer on rainy days. Especially if the forecast predicts rain all week. This is not only missing the big idea, but it is also wasteful!
• Buying holiday gifts for people way too early in the year: I know there are lots of shoppers who suck up the best deals right after Christmas. However, my husband’s family is known to purchase lots of miscellaneous gifts, like extra large sweaters, to make sure every person has the same amount of gifts the following Christmas holiday. Many times those gifts can’t be returned because they are too old or worth only a dollar to the department store. And many times the gift is totally the wrong size! I’m fine with donating new clothing to organizations, but the point of the gift is lost.

Just a few items that seem pointless if the big picture is missed. Do you have any big idea items to add? Am I off the mark? I love feedback!