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Tuesday, November 25, 2008
Drew Version 4.0
I'm in the process of doing some new design for the site, you can see the latest version here. I'd like to incorporate some of the new features of Blogger, especially post labels. I'm going to get rid of the navigation on the left hand side of the home page, I'll convert all of these individual pages into blog posts, and you can just go to the various labels pages to see each of these. This will make it much easier to update the various pages, and integrate the other site content with the blog posts. I'm also going to try to integrate the multiple blogs on the home page ("What I'm Reading Now", "What I'm Reading Now for Book Club" and "Thought of the Day") into one single master blog.Labels: Blog, Site, What's New
posted by Drew at 7:56 PM | 0
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Wednesday, November 19, 2008
How to Pay for a Home
- More than 2.2 million homeowners are more than 60 days late on their mortgage payments
- One in six homeowners owes more on a home than it's worth.
When I was starting to look for my first house in 2004, I was worried that I wouldn't be able to get a loan, or really that I wouldn't be able to get a loan big enough to buy the house I wanted. I was making pretty good money, I'm not rich but I had put away enough for a decent down payment, I didn't have any debt (other a credit card that I payed off every month) and I had a virtually perfect credit rating, but I had never been through the process of getting a mortgage and I expected it to be difficult. I wanted to live close to town, in a part of town near where I was renting at the time. I had become addicted to the short commute to work and all the conveniences, but it is more expensive than living in the 'burbs. Not California or Manhatten expensive, but my house would probably have cost less than half of what it did if it was in the area of Houston where I grew up.
I put together a spreadsheet to figure out how much money I could spend on a mortgage payment, using the last five years of data in my Microsoft Money database to estimate irregular income and expenses, things like bonuses, vacations, gifts, charitable contributions, and car maintenance. I averaged everything into a monthly expense and then used what was left over to figure out how big a mortgage I could afford based on my current income (I am a salaried engineer, so my income doesn't vary much). When I filled out the loan application, the bank approved an amount almost twice as much as the maximum amount I had calculated. I was amazed, I couldn't imagine how anyone could cut back that much to be able to handle such a big a mortgage payment.
When the opportunity came to buy my house, I had to act fast, the seller wanted to close within a month because she was using the money to buy another house. If I hadn't already been prepared with all the financial calculations, I couldn't have made an informed decision about the financing. I figured out how much cash I could scrape together, and it was right at 20% after closing costs if I spent every cent I had, and I wasn't sure exactly how much the closing costs would be. I was dealing with a fairly conservative mortgage company (Wells Fargo) and they required 20% down or private mortgage insurance (PMI). I had been reading up on PMI and I knew that paying for insurance for the bank was dumb in my case. I had a short term cash flow problem, PMI wouldn't go away very quickly, and it was absolutely zero benefit to me. I also knew that if I spent all of the cash I had to get a 20% down payment, something unexpected could very easily come up and I'd be in trouble. The bank proposed a piggyback loan to make up the difference, so I borrowed 5% of the mortgage amount to apply to the down payment at a slightly higher interest rate (I think 2 percentage points higher than my mortgage rate, which was under 6%). It had a seven-year term but I paid it off in less than a year, since I basically already had the money. Once I paid off the second mortgage, I started applying that amount to the principal on the first mortgage. I have been aggressively paying down principal, although I quit at the beginning of this year to build up a bigger emergency fund after recalculating what 6 months of bills would be without my brother as a roommate. The value of my home continues to go up, but at a slower rate, but even if it had dropped I wouldn't owe more than it is worth.
One of the mistakes I did make in my estimates was the real estate taxes. I looked online and at the tax bill the previous owner had paid, around $1,000/yr, and I used that number in my estimate. My real estate agent warned me that the property taxes were fairly high, but I didn't listen, and I was surprised at the closing when I realized that appraised tax value of the home would double and the next year's taxes would be more than $7,200. This would have been a big problem, even with the mortgage company escrowing the amount, if I had used all the cash I had to make my down payment or if I had tried to buy more house than I could comfortably afford. A couple I know had to refinance their loan after only one year because the previous appraised tax value on their new home was just the lot value, and their taxes were 10 times what they had paid their first year.
I believe most of the blame for the "financial crisis" is not on banks but on borrowers. People spending more than they can afford to, either because of overly optimistic estimates of their costs, failure to plan for the unexpected, or just plain short-sightedness. I read about a woman with two kids who's initial mortgage payment was only $100/month less than her take-home pay. That's not ignorance, that's stupidity. And now her house is being foreclosed upon, and yes, the banks are partly to blame, that's a loan that never should be made, but the person who signed their name to the contract is the one responsible. No one forced her to borrow more than she could afford, and she shouldn't have allowed herself to be talked into such an obvious disaster just waiting to happen. When I look at the small amount of basic planning I did preparing to buy my first house, I know anyone else could have done basically the same thing, and then been better prepared to make financial decisions. I know I could have borrowed more than twice as much as I did, and had a house twice as big as the one I bought, but it would have been way too risky, and I didn't want to gamble my financial future. And now a lot of the people that did make that gamble are seeing the results.
This is the second part of a series, see part one How to Pay for a New Vehicle here.Labels: Article, Blog, Financial
posted by Drew at 1:45 PM | 0
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Monday, October 27, 2008
Really? Really?
 Labels: Blog, Humor, Site of the Day
posted by Drew at 5:27 PM | 1
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Sunday, October 26, 2008
Fantasy Football
One of my geeky hobbies is fantasy football. Wait, it gets more geeky. I use my engineering analysis background to perform statistical analyses of the data, and write a mid-season report projecting who has been the most effective team owner. You can download the 2008 KFFL Midseason Report here:
Microsoft Word format (771kB)
Adobe PDF format (211kB)Labels: Blog, Fantasy Football, KFFL, Sports
posted by Drew at 8:27 PM | 0
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Texas Longhorns are Still Number 1
I went to the Texas Longhorns(1)-Missouri Tigers(11) game last weekend with my brother Aaron. We drove to Austin on Saturday afternoon with a buddy of his and tailgated until the game started at 7pm. I hadn't been back to Darrell K. Royal-Texas Memorial Stadium (formerly Memorial Statium) in at least 10 years, and there have been a lot of changes.
The university spent $150 million to reconfigure the north end zone, boosting capacity above 90,000 by adding suites and seats that will face a new scoreboard. And a big new scoreboard it is. They call it the Godzillatron (it's too big to be called a mere Jumbotron). The high-definition LED scoreboard is 134 feet wide and 55 feet high. Measuring diagonally, like they do for televisions, that's a 1,740-inch screen.
Texas dominated the Tigers from the first series, scoring 35 straight points in the first half and not allowing a point until Missouri kicked a field goal in the final second of the first half. It was great to be back at a college football game, singing and chanting and clapping and yelling; the noise is amazing.
The Longhorn band did a Tribute to Led Zepplin at the halftime show. Here they're playing Heartbreaker (Get it? Heart breaker?)
This is one of the first years that at the start of the season I thought Texas didn't have what it takes to go all the way. I hope I was wrong, and I won't doubt them that early again.Labels: Article, Blog, Football, Pictures, Sports, Travel, UT
posted by Drew at 7:52 PM | 0
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Saturday, September 13, 2008
Ike's Wrath
This is Interstate 45 going into Galveston. This picture was taken about here:
View Larger Map
Look on the map at all the houses to the west of the interstate, they are probably all gone.Labels: Blog, Houston, Hurricane
posted by Drew at 8:22 PM | 0
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Friday, September 12, 2008
Salt Lake City
I've always liked Salt Lake City, probably because I'm from Houston (flat as a pancake) and it's surrounded by mountains. Here's the view from my hotel room window.Labels: Blog, Pictures, Travel
posted by Drew at 5:47 PM | 0
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drew hevle
Studies show that women report to be happier than men, but also more miserable than men.
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Drew's blog
by Cory Doctorow.