When Dawn and David Ivanyo got married in the summer of 1992, they thought it would take them almost three years to save enough money to afford their first home.
They figured it would be a starter home, something smaller than they wanted-probably a fixer-upper-but it would be a place in which they could build some equity; perhaps turn a profit that would help toward the purchase of their next home.
It was a plan that had served generations before them, and still involved scrimping and saving and hoping for a break.
Little did they know they’d get one.
Last August, just a year after they were married, David Ivanyo noticed that mortgage interest rates were dropping. He put together some numbers and quickly realized that someone-or something-had opened a window of opportunity. The Ivanyos began looking for a house.
They weren’t alone. As interest rates plummeted to a 20-year low, the housing market became a swirling water of buyers and sellers trying to cash-in on this once in a lifetime opportunity. But for first-time buyers, that opportunity also brought some pressures:
Do you compromise on the house of your dreams just to get into the market? How big a compromise? The location, the size, the condition?
How long do you wait to lock in an interest rate? What if the rate drops after you’ve locked in?
While many of the first-time buyers shared the same characteristics, generally young and not at their professional peaks, their motivations for entering the market varied. The interest rate didn’t rule in every case.
Of course some, like the Ivanyos, saw the interest rate drop and realized they had a Twilight Zone-like opportunity. They spent every weekend on their house search, eventually dropping out for a while because the pace and pressure became too intense.
Others, like Mitch Kleiman and his wife Sarah Spalding-Kleiman of Evanston, began looking because they’d finally saved enough for a down payment and believed they could find a house they liked with what they had to spend.
“The interest rates were just an added bonus,” said Kleiman, a management consultant in Chicago.
What almost everyone interviewed for this article shared, however, were two things: A a determination not to “settle” for just any house, and a universal need to paint, paper, put-up, tear down or add to the homes they eventually bought.
“It was more important that we got the house we liked rather than any house at a good interest rate,” said Marc Singer, 26, of Buffalo Grove. He and his wife, Ellen, 24, purchased their three-bedroom ranch house last spring after almost a year of looking.
“If it didn’t come along, it didn’t come along,” said David Ivanyo, 30, of Chesterton, Ind. “We weren’t going to buy.”
Here is an unscientific portrait of a group of people with nothing in common other than their search for the traditional American Dream at a time when it was most affordable, and here’s what they learned on the way.
After a few weeks, the Ivanyos house search took on a familiar pattern: Scan the classified ads and home guides through the week, mark the possibilities and spend the weekend driving past home after home in Northwest Indiana.
“It was like a second job,” said Dawn Ivanyo, 28, a nurse, who estimates they drove by as many as 100 homes in a search of one they liked.
But it eventually paid off, even if they did get pulled over for speeding one afternoon when they became too engrossed in their search. (After hearing what had happened, the police officer didn’t write out a ticket, said David Ivanyo. “He’d just gone through the same thing.”)
What they found with the low interest rates was not only could they buy a home sooner than they expect, but “we could buy a house greater than we imagined,” said Dawn Ivanyo. When their bid on a four-bedroom, two-story home was accepted, their four-month search was over-but the worry season had just begun.
With 30 days to lock in a rate with their lender, David Ivanyo found himself watching the bond market in an effort to predict interest rates. He called the bank every day to check interest rates and constantly crunched numbers, mindful that his sister bought a home a few years earlier when interest rates were 9.5 percent
“They went up and came back down and started to fluctuate at the end,” said Ivanyo, a production foreman. He said they locked in a 30-year fixed mortgage at 7.5 percent.
Instead of selling it in five or seven years for a bigger home, “we can easily spend the rest of our lives,” said Dawn Ivanyo.
Mitch Kleiman, 28, and Sarah Spalding-Kleiman, 31, knew they weren’t going to spend the rest of their lives in their first house. When they began looking in January, it was because they wanted to stay in the Chicago area for a while longer and felt this would be a good time to build equity.
“The interest rates didn’t really have any impact,” said Kleiman. “If we had to take a 7 percent or 7.5 percent rate that wouldn’t have been a deal-breaker.”
“I wasn’t even aware (the interest rates were that low), said Spalding-Kleiman, who works as a waitress and for a catering firm in Chicago.
So they went looking for a house first and an interest rate second. They found the house in February, a two-story home in Evanston with a stone front, three bedrooms and 1 1/2 baths, a small sun room, two fireplaces, finished basement and a one-car garage.
They found the interest rate a few weeks later, a 7-23 balloon mortgage that enabled them to lock in at the enviable rate of 6.5 percent. After seven years, they either have to pay the balance of the loan, or refinance at the current market rate.
“We knew we weren’t going to keep (the house) more than seven years and didn’t want to pay for the security (of a loan) beyond that,” said Kleiman.
And while they feel terrific about the interest rate, it also tells them something: “It tells me I really better move in seven years,” said Kleiman. “I’ve got a feeling they won’t be at this level for a long, long time.”
But what do you do if the rates dip after you’ve locked in?
The Singers spent a year looking for a home before they found their three-bedroom ranch in Buffalo Grove last spring. it was close enough to Bensenville where Ellen works as a teacher and to Libertyville where Marc’s company, Motorola, had transferred him.
The couple, who married in June, talked about what each wanted in a home that would improve on the townhouse Marc bought before meeting Ellen. They wanted a two-car garage so neither would have to trudge through the snow, and a place big enough to accommodate Marc’s drums.
They found the house, applied for a loan, locked in 60 days before closing at 7 3/8 percent. And then watched the prevailing rates fall.
“We applied to another lender (who was offering) 7 1/8” percent, said Marc Singer. They didn’t close on the first loan.
The rate continued to drop some, down as low as 7 percent, but they figured the different between the two was $18 a month.
“I wasn’t as upset as if we’d stuck with 7 3/8,” he said.
Dan Dietz wasn’t certain how long the interest rates would continue their downward spiral when he and his fiancee, Lindsey Dahl, 25, began looking for a home last November. But they felt the pressure to act before interest rates made an about-face and resumed their original position, which is to say, made buying a home too expensive for them.
“We had to move fast because interest rates were predicted to go up. After talking to people, they felt interest rates would go up in the spring,” said Dietz, 25, who works in Melrose Park.
He and Dahl, a customer service manager at a software company in Arlington Heights, realized that the low rates presented an opportunity they couldn’t let slide.
“When you’re looking at interest rates that are at a (20)-year low, you have to seriously consider buying something if you’re able,” said Dietz.
Moreover, added Dahl, “this is probably the only time we’ll be able to buy a house without a contingency.” At the time, both had been living with their parents at the time. They plan to marry later this month.
They started looking in Palatine, but found most of the homes they could afford were 30 years old, with structural problems.
“We were looking for a house that was structurally sound even if it might need some cosmetic work,” said Dahl.
On a memorable February day when it was 45 below zero, they saw their house: a 16-year-old three-bedroom raised ranch in Hoffmann Estates, with two full baths and an attached two-car garage.
“Lindsey said, `Lets put a bid down,’ and I said `Are you sure?’ ” recalled Dietz. “I know we were looking for a house, but when you realize you’re going to put a bid down you realize it’s a really big purchase.”
They bought the house and locked in at a 7.5 percent interest rate. “The interest rates dipped some afterward,” said Dietz, “but now that they’re up we feel a lot better.”
As it is, they believe the interest rate they secured made a difference.
“I think we definitely got more house than Lindsey and I thought we could the first time. They enabled us to get a little bigger house,” said Dietz.
But a house they had to work on, like almost everyone else.
“It was a worker,” he said. “We pretty much gutted it and remodeled, put in new carpeting, retiled the floors, redid the bathroom and kitchen.”
Their plan: to stay in the house for another five or eight years, then move up to something larger.
“That’s not a fixer-upper,” said Dahl.
Tribune photo by Val Mazzenga
Tribune photo by Brent Jones
Photo for the Tribune by Brian Schoeni
