I spotted the ad at right on the Seattle Times homepage yesterday. It’s not as patronizing as Quadrant Homes’ old “down payment latte” ad was, but the claim of buying for just $800 a month immediately jumped out at me as unlikely.
Running some quick numbers through my Simple Affordability Calculator indicates that to have a PITI payment of $800 or less, your purchase price would have to be no more than $157,000 at an interest rate of 4.0%. Of course, that assumes you have $31,400 saved up to make the 20% down payment. If you don’t have the down payment or you don’t qualify for the lowest interest rate, the purchase price that gets you an $800 payment will be even less.
So, where in the Seattle area is Polygon selling brand new homes for $157,000 or less? I clicked on the ad to find out. Three clicks down from the sparse, unhelpful landing page that the ad sends you to, I found the sales pitch for “Dunhill Terrace,” a townhome complex a couple miles north of Alderwood Mall. On this page, they advertise homes “from $176,990,” and claim that “If Your Rent is More Than $800, You Can Own at Dunhill Terrace!”
Let’s run the numbers on that claim. According to my calculator, if you put 20% down on that $176,990 home your monthly payment (PITI) on the resulting $141,592 mortgage at 4.0% would be $896. Wait, that’s already more than $800. Oh, and according to the MLS listings for the advertised floor plan, HOA dues for these townhomes add another $128 to that monthly payment, bringing your total monthly nut up to $1,024—28% higher than the advertised $800 monthly payment.
Home financing is not some sort of dark art full of unexplained mysteries. There are only a few ways you could buy one of these $180k homes and keep your payment down to the advertised $800 a month. Even with a 2.0% interest rate (which you can’t get, even if you get an ARM), the PITI plus HOA dues add up to $871, so it seems apparent that they’re conveniently excluding the non-optional $128 HOA dues from their calculations, which feels rather dishonest to me.
Here are all the ways I could think of that you might be able to get down to $800 a month:
- Put down $82,250 (46%) instead of just $35,400 (20%)
- Get an adjustable-rate loan (payment will increase later)
- Get an interest-only loan (payment will skyrocket later)
- Some sort of short-term builder incentive
So which one is it? Polygon doesn’t let on in their marketing materials. Even the pdf they link to on the Dunhill Terrace page just repeats the $800 claim without offering any explanation.
As it turns out, there is one Polygon development in the Seattle area with starting prices under $157,000—The Heights At Ridgeview in SeaTac, where you can get a 1-bed, 1-bath townhouse for $140k. Your PITI would come in below the ad’s $800 claim at $719, but the $185/mo HOA dues would push you back up to $904. Oh, and their page for The Heights at Ridgeview changes the claim to “If Your Rent is More Than $650, You Can Own at The Heights at Ridgeview!” So another strikeout there.
Does anyone fall for this junk? Why is it even legal to make claims like this that are so clearly false?