Personal Paths to Security
Eric and Debra Stillwell aren’t in the same place they were last January.
Then, the couple, whose income is about $80,000 a year, were renting an $840-a-month apartment in Burbank. Now they own a four-bedroom home in Santa Clarita that they estimate is worth at least $235,000.
The couple had long thought they’d buy a home in Burbank or Glendale. But after two discouraging years of finding nothing appealing in their price range, they decided last winter to extend their search to the new developments in the northern reaches of Los Angeles County. As they did, the residential real estate market there began heating up, convincing them that they should buy sooner, with a smaller down payment, rather than later, with a larger one.
“The difference in 30 miles is unbelievable,” said Eric, 36, noting the premium homeowners pay to live closer to the urban center. “We ended up getting something for a price you’d never get in Burbank.”
“Something” being 1,898 square feet of home on a 7,000-square-foot corner lot with a view of the Santa Clarita Valley. Fortunately, the commuting this involves--he works as a production associate at Paramount Pictures in Hollywood, she as a part-time nurse at Providence St. Joseph Medical Center in Burbank--isn’t too bad, Eric says.
So how’d they get there?
“We hunkered down” and saved, Eric said. “You just would say, ‘We won’t buy that, we’ll save the money for the house.’ ”
The couple had $8,000 set aside in retirement and other accounts when they talked to Massachusetts fee-only financial planner Linda Gadkowski early last year. But they also owed about $8,000 in consumer debt, on which they were making accelerated payments.
It helped that both have side ventures--Eric does paid speaking engagements at “Star Trek” conventions, and Debra, 40, books actors for public appearances. That income was added to the house pot.
By August, when the home they had chosen was built and they were ready to close escrow, the Stillwells had paid off their $3,000 credit-union loan and the $4,750 they owed on credit cards. Furthermore, they had accumulated $12,000 for a down payment.
Indeed, Gadkowski’s prime concern when she spoke to them last year was getting their spending under control. At that time, they had already lightened a debt burden that had once topped $60,000, thanks to personal indulgence and a failed business venture. However, Eric had had about $25,000 of that discharged in a bankruptcy forced on him by a creditor.
But buying a new home has brought many expenses with it. Such as the backyard that needed to be landscaped before the rains come. So the couple have turned again to their credit cards and built up a sizable debt.
But it’s different this time, Eric says. These expenditures were planned, not impulsive, and there’s a work project underway that will provide the money to pay it off this year.
Because of Eric’s bankruptcy, Gadkowski had told the couple that they might have trouble trying to buy a home with a low down payment or finding an attractive mortgage rate.
As it turned out, Eric says, they were able to buy their home with 5% down and get a 30-year fixed-rate loan at 7.1%. Private mortgage insurance accounts for about $140 of their $1,900 monthly housing obligation, but they hope that if their development’s property values continue to rise rapidly, they’ll soon have enough equity to get the PMI dropped.
In the meantime, they’ve stepped up their retirement saving, as the planner urged them to do. Eric has doubled his 401(k) contributions to 12%, and Debra is raising her 403(b) contributions to 6% of her salary from 4%. These savings are all going into a range of stock mutual funds.
