Toya R. Kelker, Director of Homeownership at East Akron Neighborhood Development Corp., answered some common questions among first-time buyers.
Kelker runs the non-profit organization’s free monthly classes for first-time homebuyers. The courses – which have been online during the pandemic – teach everything from understanding credit and money management to how to buy a home and maintain it after you buy it.
Q. Who should consider buying their first home?
A. Tenants who pay full rent and have permanent income. You generally pay less for a mortgage payment than for a rent payment. Buying a house remains one of the best ways to secure your personal wealth.
Q. What should be the first step for anyone considering buying their first home?
A. Before you start buying a home, learn about the home buying process. Buyers need to understand how credit, mortgages, and closing costs work. More importantly, they need to determine how much they can afford to pay on a monthly mortgage.
Q. What is the most important thing first-time homebuyers need to understand about credit and / or credit scores?
A. Lenders review unresolved credit scores and non-medical accounts, including collections, liens and judgments. The most important factor, however, is how you use the credit you already have. Keep credit card balances below 30% of your limit. Avoid late payments, as any delay within 30 days will dramatically lower your credit score. And keep installment loans like car payments to a minimum, as these can initially impact your scores.
Q. Millennials often have student loan debt. Will this prevent many from buying their first home?
A. It’s all about the debt-to-income ratio. If student loans are not repaid (with a fixed payment amount), lenders use 1-2% of a student loan balance as the payment amount to calculate the debt-to-income ratio. This can sometimes affect the amount of money a person can borrow or prevent them from getting a loan. Current payments on loans and credit cards are important.
Q. What expenses do first-time buyers often overlook when buying their first home?
A. The total amount needed to purchase is called “upfront costs”. They include the down payment, closing costs, moving costs, down payment, home inspection costs, and cash reserves for contingencies.
Q. How does a first-time buyer determine how much they can afford – and is it the same as what a lender allows them to borrow?
A: Take a look at your budget and figure out what you can afford, not only for a monthly mortgage payment, but also for household expenses. Buyers should understand that lenders lend based on their gross income (your total employer or client salary before taxes and other deductions) and NOT net income (how much you earn, less taxes and other deductions and expenses). What a lender offers is not always what you can afford.
Q. What programs are available to help first-time home buyers in Greater Akron with down payments and other costs?
A. Some lenders offer their own grants / down payments or help with closing costs. The Federal Home Loan Bank of Cincinnati offers Welcome Home funds each year in March through most lenders in the area and the Ohio Housing Finance Agency offers grants / down payment assistance.
Q. After first-time buyers get their finances in order and understand the process, what’s the first step in finding a home?
A. After inquiring, find / choose a lender and then request pre-approval.
Q. Should a first-time buyer use a real estate agent? And if so, what’s the best way to find a real estate agent you can trust?
A. Buyers should definitely hire a real estate agent. HUD housing counseling agencies are required to provide buyers with referrals from at least three real estate agents. Also ask your family and friends for recommendations. You can also check the websites of the National Association of Real Estate Brokers or the National Association of Realtors.
Q. How important is a home inspection before buying a home?
A. Very important. There are dozens of home components that a trained professional will inspect. Many problems cannot be seen with the naked eye. They will provide a report on the condition of the house. Paying a few hundred dollars for a pre-purchase inspection can save you thousands of dollars in repairs or other work.
Q. Finally, once you find a house that you want to buy, how much time does it usually take from the time you sign the papers to the day you can move in?
A. Typically 30 to 45 days
For more information on East Akron Neighborhood Development Corp.’s free home buying courses, visit EANDC.org or call 330-724-0244.